Annual Report and Consolidated Financial Statements
for the year ended 31 December 2023
Balanced Commercial Property Trust Limited
Contents
Headlines and Performance Summary
Headlines 1
Performance Summary 2
Strategic Report
Chairman’s Statement 3
Business Model and Strategy 6
Promoting the Success of the Company 8
Key Performance Indicators 10
Principal Risks and Future Prospects 11
Managers’ Review 15
Property Portfolio 22
Environmental, Social and Governance (ESG) 23
Spotlight on Southampton
29
Governance Report
Directors 32
Directors’ Report 33
Corporate Governance Statement 37
Report of the Audit and Risk Committee 41
Directors’ Remuneration Report 44
Statement of Directors’ Responsibilities 46
Independent Auditor’s Report
47
Financial Report
Consolidated Statement of Comprehensive Income 54
Consolidated Balance Sheet 55
Consolidated Statement of Changes in Equity 56
Consolidated Statement of Cash Flows 57
Notes to the Consolidated Financial Statements 58
AIFM Disclosure 81
Notice of Annual General Meeting
82
Other Information
Shareholder Information 84
Historic Record 85
Alternative Performance Measures 86
EPRA Performance Measures 89
Glossary of Terms 92
How to Invest 94
Company Overview 95
Corporate Information 96
THIS DOCUMENT IS IMPORTANT AND REQUIRES YOUR IMMEDIATE ATTENTION. If you are in any doubt about the action you should
take, you are recommended to seek your own independent financial advice from your stockbroker, bank manager, solicitor, accountant
or other independent financial adviser authorised under the Financial Services and Markets Act 2000 if you are in the United Kingdom
or, if not, from another appropriately authorised financial adviser. If you have sold or otherwise transferred all your ordinary shares in
Balanced Commercial Property Trust Limited please forward this document, together with the accompanying documents, immediately to
the purchaser or transferee or to the stockbroker, bank or agent through whom the sale or transfer was effected for transmission to the
purchaser or transferee. If you have sold or otherwise transferred only part of your holding of shares, you should retain these documents.
Front Cover Photos:
Top Left: Liverpool, Hurricane 52, Estuary Business Park
Top Right: London, Birchin Lane
Bottom Left: Solihull, Sears Retail Park
Bottom Right: London, St. Christopher’s Place Estate
2023 Annual Report and Consolidated Financial Statements | 1
Governance Report Auditor's Report Notice of AGM Other InformationStrategic Report
Headlines and
Performance Summary
Financial Report
Headlines and Performance Summary
-3.7
pence
IFRS Earnings per Ordinary Share
Earnings per Ordinary Share were -3.7 pence per share for the year ended 31 December 2023 (2022: -13.1 pence per share).
109.8
pence
IFRS Net asset value per Ordinary Share
Net asset value per Ordinary Share was 109.8 pence as at 31 December 2023 (2022: 118.5 pence).
£59.2
million
Rental income
Rental income was £59.2 million for the year ended 31 December 2023 (2022: £58.7 million).
-3.3
per cent
Net asset value total return*
Net asset value total return of -3.3 per cent for the year ended 31 December 2023 (2022: -9.2 per cent).
-12.5
per cent
Share price total return*
Share price total return of -12.5 per cent for the year ended 31 December 2023 (2022: -11.7 per cent).
10.0
per cent
Monthly dividend increased during the year
From October 2023, the rate of monthly interim dividends was increased to 0.44 pence per share. This represented
an increase of 10.0 per cent compared to the previous monthly dividends.
104.7
per cent
Dividend cover on a cash basis*
Cash dividend cover was 104.7 per cent for the year ended 31 December 2023 (2022: 104.8 per cent).
£320
million
New Debt Facility
The Company signed up to a New Debt Facility provided by incumbent lender Barclays and a new lender HSBC.
Additional
information can be found in Note 13.
£14.3
million
Sales
Disposed of two office holdings at an aggregate sales price of £14.3 million for the year ended 31 December 2023.
Further detail can be found in note 9. A further two office disposals were completed post year-end with an aggregate
sales price of £54.6 million. These disposals are part of the strategic repositioning of the portfolio.
£1.4
million
Major development
Major development scheme at Strategic Park, Southampton completed, delivering a rent roll in excess of £1.4 milion
per annum and a 12 month total return of 13.4 per cent.
4
per cent
Carbon emissions (Scope 1 & 2)
4 per cent increase in Scope 1 & 2 absolute emissions (-26 per cent in 2022). Emissions intensity reduced by 16 per
cent (-13 per cent in 2022).
* See Alternative Performance Measures on pages 86 and 88.
Potential investors are reminded that the value of investments and the income from them may go down as well as up and investors
may not receive back the full amount. Tax benefits may vary as a result of statutory changes and their value will depend on
individual circumstances.
Headlines
2 | Balanced Commercial Property Trust Limited
Headlines and Performance Summary
Performance Summary
Total Returns for the year
*
Year ended
31 December
2023
Year ended
31 December
2022
Net asset value per share -3.3% -9.2%
Ordinary Share price -12.5% -11.7%
Portfolio -0.7% -6.5%
MSCI UK Quarterly Property Index -1.5% -8.9%
FTSE All-Share Index +7.9% 0.3%
Capital Values
Year ended
31 December
2023
Year ended
31 December
2022 % change
Total assets less current liabilities (£’000) 799,590 1,093,103 -26.9%
Net asset value per share 109.8p 118.5p -7.3%
EPRA Net Tangible Assets per share
**
109.8p 118.4p -7.3%
Ordinary Share price 72.5p 88.5p -18.1%
FTSE All-Share Index 4,232.0 4,075.1 +3.9%
Ordinary share price discount to net asset value per share
*
(34.0)% (25.3)% -8.7%
Net Gearing
*
24.4% 23.4% +1.0%
Earnings and Dividends
Year ended
31 December
2023
Year ended
31 December
2022
Earnings per Ordinary Share (3.7)p (13.1)p
EPRA Earnings per Ordinary Share
**
5.1p 4.8p
Dividends per Ordinary Share 4.92p 4.70p
Dividend yield
*
6.8% 5.3%
Ongoing Charges
Year ended
31 December
2023
Year ended
31 December
2022
As a percentage of average net assets (including direct property expenses)
*
1.54% 1.39%
As a percentage of average net assets (excluding direct property expenses)
*
0.96% 0.86%
* See Alternative Performance Measures on pages 86 and 88.
** See EPRA Performance Measures on pages 89 to 91.
The historic record from launch can be found on page 85.
2023 Annual Report and Consolidated Financial Statements | 3
The macro-economic risk factors that were prevalent in 2022
began to ease during 2023. While the UK slipped into a
shallow technical recession in the second half of the year, this
is forecast to be short and inflation, which has weighed heavily
on financial markets, fell towards the end of the year.
Uncertainties linger as interest rates remain at a 15-year
high, the rate of inflation is still above target and we are in an
environment of significant geo-political risk. The last eighteen
months have been challenging for real estate as investment
performance suffered due to rising interest rates leading to
yield increases and a repricing of the asset class. Investors
faced the impact of higher borrowing costs and reduced capital
flows as the attractiveness of real estate deteriorated. As
a consequence, UK investment volumes were low by recent
measures with some properties proving to be highly illiquid.
On a positive note, the occupational markets have proven to be
more resilient than many expected.
Company Performance
Against this challenging economic and property market
backdrop, the Company has delivered a net asset value (‘NAV’)
total return of -3.3 per cent for the year. The NAV per share as
at 31 December 2023 was 109.8 pence, down 7.3 per cent
from 118.5 pence per share as at 31 December 2022.
The share price total return for the year was -12.5 per cent
with the discount to NAV standing at 34.0 per cent at the year
end, as the negative sentiment towards the commercial real
estate sector continued to affect the rating of the shares. The
Board has continued its focus on rebalancing the portfolio with
the disposal of two office holdings in December 2023 and a
further two office sales since the year end, and there has been
positive movement in the share price in 2024. At the time of
writing the share price is 78.7 pence per share, a discount of
28.3
per cent to the NAV.
The following table provides an analysis of the movement in the
NAV per share during the year.
Pence per share*
NAV per share as at 31 December 2022 118.5
Unrealised decrease in valuation of property portfolio (8.1)
Realised loss on sale of properties (0.6)
Movement in interest rate swap (0.1)
Net revenue 5.0
Dividends paid (4.9)
NAV per share as at 31 December 2023 109.8
* Based on the average number of shares in issue during the year.
Portfolio Performance
The Company’s portfolio delivered a total return of -0.7 per
cent over the year, outperforming the MSCI UK Quarterly
Property Index to December 2023 (‘MSCI’) return of -1.5 per
cent. Relative outperformance was driven by an income return
of 5.4 per cent against the Index return of 4.7 per cent, with
capital returns in line against the Index at -5.9 per cent.
We are at a stage of the cycle where income is driving returns
and as such it was pleasing to see the portfolio’s net operating
income grow by 5.3 per cent with all sub-sectors delivering
rental growth and the completion of 76 leasing initiatives
across the portfolio.
Despite the relative outperformance against the Index, the
portfolio was negatively impacted by the Company’s exposure
to the office sector. This is being addressed with momentum
in our sales programme, which, as mentioned above has seen
the disposal of two office holdings in December 2023 and a
further two sales since the year end, raising total proceeds of
£68.
9 million. The portfolio’s exposure to the office sector has
fallen to 22.2 per cent at the time of writing, which is less than
the Index weighting (24.2 per cent). We anticipate further sales
activity within the capital markets as we continue to recycle
capital to improve performance.
Strategic Report
Chairman’s Statement
Paul Marcuse, Chairman
Governance Report Auditor's Report
Notice of AGM Other InformationStrategic Report
Financial Report
Headlines and
Performance Summary
4 | Balanced Commercial Property Trust Limited
Strategic Report
Dividends
The Company paid twelve interim dividends totalling 4.92 pence
per share during the year, being nine monthly dividends of
0.4 pence per share, followed by a 10 per cent increase and
three further monthly dividends at a rate of 0.44 pence per
share. The level of dividend cover for the period was 104.7 per
cent on a cash basis and the Board will continue to keep the
level of dividend under review.
Borrowings
The Company has a £260 million term loan in place with
L&G which matures on 31 December 2024. As previously
announced, the Company signed up to a new debt facility in
September 2023 provided by incumbent lender, Barclays Bank
Plc, and a new lender, HSBC UK Bank Plc. This facility is in two
tranches and includes a committed £260 million Term Loan,
which can only be drawn to refinance the existing £260 million
L&G Loan. There is also a £60 million Revolving credit facility,
£30 million of which was drawn down at the year-end and has
subsequently been repaid. More details on the loan facilities
are included in note 13 to the financial statements.
The new debt facility enables the Company to retain the
competitively priced L&G Loan which is fixed at 3.32 per cent up
to maturity, whilst also ensuring the future liquidity needs of the
Company are fully funded at an acceptable commitment
fee.
As at 31 December 2023, the Company’s loan to value, net of
cash (‘LTV’) was 24.4 per cent and the weighted average interest
rate on the Group’s total current borrowings was 3.8
per cent.
Continuation Vote
In accordance with the Articles of Incorporation, the Directors
are required to put an ordinary resolution to shareholders
in relation to the continuation of the Company in 2024 (the
“Continuation Vote”). If at that meeting such resolution is not
passed, the Board shall, within twelve months of such meeting,
convene an extraordinary general meeting of the Company at
which a special resolution shall be proposed to the members
of the Company for the winding up of the Company and/or a
special resolution shall be proposed to the members of the
Company for the reconstruction of the Company, provided
that such resolution for the reconstruction of the Company
shall, if passed, provide an option to Shareholders to elect to
realise their investment in the Company in full. The Board’s
assessment of going concern can be found on page 35.
On 15 April 2024, the Board announced that it has been
carefully considering for some time, with its advisers, its
strategic options to enhance value for its shareholders, and
that it has formalised these deliberations into a strategic
review process (the “Strategic Review”) (further details of which
are set out below).
Once the Strategic Review has been completed, the Board
will convene a general meeting of the Company at which the
Continuation Vote will be proposed.
Strategic Review
Despite the Company’s successful and ongoing strategic
disposal programme, which has reduced the portfolio’s
exposure to the underperforming office sector, and recent
improvements in the Company’s share rating, its share price
remains at a material discount to the Company’s net asset
value. The Board, together with its advisers, has therefore
been carefully considering the Company’s strategic options for
some time.
As part of the Strategic Review, the Board will consider all options
including, but not limited to, continuing the Company with further
actions to narrow the share price discount to NAV; selling the
Company’s portfolio or subsidiaries (or portion thereof); returning
capital to shareholders; changing the Company’s investment
strategy and/or management arrangements; commencing a
managed wind down; selling the entire issued share capital of
the Company or undertaking some other form of consolidation,
combination, merger or comparable corporate action.
Shareholders are welcome to send their comments to
chairmanBCPT@georgeson.com, in particular on their priorities for
their investment in the Company and the options described above.
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 for the
Company as a whole. The outcome of the Strategic Review
is expected to be announced in Q3 2024, and thereafter the
Continuation Vote will also be held. The Board looks forward to
updating shareholders on the progress of the Strategic Review
and will make further announcements in due course, noting
that there is currently no certainty as to the outcome of the
Strategic Review.
2023 Annual Report and Consolidated Financial Statements | 5
Strategic Report
Board Composition
Karima Fahmy was appointed as an independent non-executive
Director of the Company with effect from 19 January 2024.
Karima is a corporate lawyer with extensive experience of the
UK property sector.
Following a significant increase in other time commitments,
Hugh Scott-Barrett retired from his role as non-executive Senior
Independent Director in February 2024. I would like to thank
Hugh for his considerable contribution to the Company and
wise counsel over recent years. I am pleased to confirm that
Isobel Sharp, who is Audit and Risk Committee Chair, has also
assumed the role of Senior Independent Director.
Environmental, Social and Governance (‘ESG’)
Every Board director is a member of the ESG Committee which
is established to ensure that the Managers are driving year-
on-year improvements in portfolio performance, process and
governance. The Board was pleased to note the Company’s
return to the top of its Global Real Estate Sustainability
Benchmark peer group in 2023, achieving a score of 79/100,
conferring a three green star
rating.
As work has continued to future-proof the portfolio in line
with our Net Zero Carbon target and the Minimum Energy
Efficiency Standards, the Company is also focused on the
ESG fields of social, biodiversity and transitional risk where
we expect to make meaningful progress during the upcoming
year. Giv
en the composition and quality of the portfolio, the
Board and Managers remain of the view that the Company’s
asset base is well-positioned in relation to the evolving
ESG landscape.
Outlook
Market participants across real estate and the wider financial
sectors have been keenly monitoring the outlook for UK interest
rates, with the potential for a cut in the base rate in the second
half of 2024. There are also upcoming general elections,
most notably in the UK and US, which add an extra layer of
complexity to the outlook.
The year ahead will most likely see continued divergence in
performance across property sectors, sub-sectors and markets.
Asset fundamentals rather than market yield compression
should provide a platform for value creation, and we believe
that this is an opportune time for a diversified strategy.
Paul Marcuse
Chairman
26
April 2024
Governance Report Auditor's Report
Notice of AGM Other InformationStrategic Report
Financial Report
Forward-looking statements
This document may contain forward-looking statements with respect to the financial condition, results of operations and business
of the Company. Such statements involve risk and uncertainty because they relate to future events and circumstances that could
cause actual results to differ materially from those expressed or implied by forward-looking statements. The forward-looking
statements are based on the Directors’ current view and on information known to them at the date of this document. Nothing
should be construed as a profit forecast.
Liverpool Hurricane 47, Estuary Business Park
Headlines and
Performance Summary
6 | Balanced Commercial Property Trust Limited
Strategic Report
Board
The Board of Directors is responsible for the overall stewardship of
the Company, including investment and dividend policies, corporate
strategy, gearing, corporate governance procedures, ESG risk and
risk management. As set out in the Directors’ Responsibilities on
page 46, the Board is also responsible for the preparation of the
Annual Report and Consolidated Financial Statements for each
financial year. Biographical details of the Directors, all of whom are
independent non-executive Directors, can be found on page 32.
The Company has no executive Directors or employees.
The Board has contractually delegated the management of
the investment portfolio and other services to the Managers.
A summary of the terms of the management agreement is
contained in note 3 to the consolidated financial statements.
Investment Strategy
Purpose
The Company’s purpose is to provide investors with market
access to a diversified UK commercial property portfolio,
providing a convenient and cost-effective investment choice in
meeting their longer-term investment needs.
Objective
The Company’s investment objective is to provide ordinary
shareholders with an attractive level of income together with
the potential for capital and income growth from investing in a
diversified UK commercial property portfolio.
Investment Policy
The Company’s policy is to hold a diversified portfolio of freehold
and long leasehold (over 60 years remaining at the time of
acquisition) UK commercial properties. It invests principally in
three commercial property sectors: office, retail (including retail
warehouses) and industrial. It can also have exposure to other
commercial property sectors such as healthcare, leisure, hotels
and serviced apartments, residential property, student housing,
car parks, petrol stations, storage and supermarkets.
The Company invests in properties which the Board, on the
advice of the Managers, believes will generate a combination
of long-term growth in income and capital for shareholders.
Investment decisions are based on an analysis of, amongst
other things, sector and geographic prospects, tenant covenant
strength, lease length, initial and equivalent yields, ESG risk
and opportunity factors and the potential for alternative uses
and/or development or redevelopment of the property.
Investment risks are spread by investing across different
geographical areas and sectors and by letting properties to lower
risk tenants. The Company has not set any maximum geographic
exposures, but no single property may exceed 15 per cent of
total assets and the five largest properties (excluding indirect
property funds) may not exceed 40 per cent of total assets (in
each case at the time of acquisition). Short leasehold properties
(with less than 60 years remaining) may not exceed 10 per cent
of total assets at the time of acquisition.
The Company is permitted to invest up to 15 per cent, at the
time of acquisition, of its total assets in indirect property funds
(including listed property companies) which invest principally in UK
property, but these investments may not exceed 20 per cent of
total assets at any subsequent date. The Company is permitted
to invest cash, held by it for working capital purposes and awaiting
investment, in cash deposits, gilts and money market funds.
The Company uses gearing throughout the Group (defined
on page 95) to enhance returns over the long-term. Gearing,
represented by borrowings as a percentage of total assets, may
not exceed 50 per cent. However, the Board’s present intention
is that borrowings of the Group will be limited to a maximum of
35 per cent of total assets at the time of borrowing.
Investment of Assets
At each quarterly Board meeting, the Board receives a detailed
presentation from the Managers which includes a review of
investment performance, recent portfolio activity and a market
outlook. It also considers compliance with the investment policy
and other investment restrictions during the reporting period. An
analysis of how the portfolio was invested as at 31 December
2023 is contained within the Managers’ Review on pages 15 to
21
and a portfolio listing is provided on page 22.
The Group’s borrowings are described in note 13 to the
consolidated financial statements.
Environmental, Social and Governance (ESG)
The importance of environmental and social factors, together
with the management of those factors through corporate
governance and property management, continues to strengthen
within the UK commercial property market. The Company,
supported by its Managers has continued to make progress in
developing its approach to integrating ESG factors into strategy,
as evidenced in our annual ESG Report.
The Company carries on business as a closed-ended property investment company. Its shares are
traded on the Main Market of the London Stock Exchange.
Business Model and Strategy
2023 Annual Report and Consolidated Financial Statements | 7
Strategic Report
Attention to ESG matters continues to be an important
determinant of the confidence which existing and prospective
shareholders place in the Company to provide them with
attractive and appropriate risk-adjusted returns. We remain
mindful of feedback that shareholders provide on our approach
to ESG matters and we continue to engage with them regularly.
We recognise that certain environmental and social attributes
of the assets held by the Company can be material to financial
performance across the diversified portfolio. This applies in
terms of optimising net operating income today and supporting
income and capital growth in the longer-term.
Our strategy therefore focuses particularly on:
• Ensuring that properties perform efficiently, support flexible
and productive occupancy, and contribute positively to the
health and wellbeing of the people that work, shop or live
in them. This is an increasingly important attribute which
influences their appeal to the occupier market and thus
their ability to retain occupiers and support rental growth.
• Ensuring that properties are fit-for-purpose and resilient
in the context of climate change, a dynamic regulatory
environment, and the rapid advancement of technology,
helping to mitigate their rate of depreciation and reduce
their exposure to various forms of risk.
• Ensuring that properties make a positive contribution to the
local communities in which they are situated, can help to
improve patronage, support wider economic performance
and enhance the skills and employment prospects of local
people, in turn making the local market a more attractive
investment location.
Continuation Vote
As set out in the Articles of Incorporation, the Directors are
required to put an ordinary resolution to shareholders in
relation to the continuation of the Company in 2024. If at that
meeting such resolution is not passed, the Board shall, within
twelve months of such meeting, convene an extraordinary
general meeting of the Company at which a special resolution
shall be proposed to the members of the Company for the
winding up of the Company and/or a special resolution
shall be proposed to the members of the Company for the
reconstruction of the Company, provided that such resolution
for the reconstruction of the Company shall, if passed, provide
an option to Shareholders to elect to realise their investment in
the Company in full.
As set out in the Chairman’s Statement on page 4 the Board
announced on 15 April 2024 the commencement of a Strategic
Review. The Continuation Vote will be held after the completion
of the Strategic Review. A wide range of options are being
considered and at this early stage there is no certainty as to
the outcome of the Strategic Review. This section reflects the
Company’s current business model and strategy.
Discount Control
The policy regarding share buybacks was set out in a Circular
issued to shareholders ahead of the General Meeting in
November 2014. This detailed the Company’s continued
commitment to the application of share buybacks to limit any
discount to the NAV per share at which the Company’s shares
may trade. A discount of 5 per cent or more remains a level at
which the Board will review share buyback implementation.
The review will take into account the current and the likely
prospective level of discount to the value of your Company’s
high quality but, by their nature, illiquid assets, which are
independently valued every quarter. It will also consider other
factors that the Board believes might promote the achievement
of the Company’s long-standing, stated objectives.
These factors include other property investment opportunities,
whether direct or indirect, which may be standing at greater
levels of discount to underlying value than the Company’s
own shares; the impact on net asset value accretion and
improvement in dividend cover from share buybacks; and the
levels of liquidity, gearing and loan to value within the Company.
The Company launched a share buyback programme in June
2021, using some of the proceeds from property sales and
purchased 97.8 million shares (12.2 per cent of the issued
share capital) over the course of 2021 and 2022, at an average
discount at the time of purchase of 20.8 per cent and a cost of
£103.7 million. In the current economic climate, preservation
of cash is important and the Company has not bought back
any shares since September 2022; however, consideration will
continue to be given to buybacks if the Board believes that this
course of action is in the best interests of shareholders.
Shareholder Engagement
The Board and the Managers recognise the importance of both
marketing and PR in increasing demand for the Company’s
shares. The Managers offer a range of private investor
savings schemes, details of which can be found on page 94.
In addition, meetings are held regularly with current and
prospective shareholders and stockbroking analysts covering
the investment company sector. The Managers hold a live
presentation every quarter to communicate results and provide
an update on the property market. Investor Meet Company has
recently been engaged to facilitate this and enhance the user
experience. Communication of quarterly portfolio information is
made through the Company’s website. In addition, the Strategic
Review will take into account the views of shareholders and all
shareholders are welcome to send their views on the Strategic
Review to chairmanBCPT@georgeson.com
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Headlines and
Performance Summary
8 | Balanced Commercial Property Trust Limited
Strategic Report
The Board’s continued focus on promoting the long-term
success of the Company in response to stakeholders needs
and aspirations is now formalised in the Company’s reporting
in accordance with section 172(1) of the Companies Act
2006 (the “Act”). Although section 172 applies directly to UK
incorporated companies, the intention of the UK Corporate
Governance Code is that matters set out in this section are
reported on by all listed companies. Under section 172 of
the Act, Directors have a duty to act in the way they consider,
in good faith, would be most likely to promote the success of
the Company for the benefit of its members as a whole and,
in doing so, have regard (amongst other matters) to the likely
consequences of their Board’s decisions in the longer term and
how they have taken wider stakeholders’ needs into account.
As an investment company, with no employees, the Company’s
principal working relationships are with the Managers, other
professional service providers (corporate brokers, registrar,
Company Secretary, auditor, depositary, tax and legal advisers)
and lenders. Our main working relationship is with the Managers
who we hold to account in managing shareholder assets. With
recognition of the need for sustainability as a fundamental
element in achieving longer term success, we continued to work
very closely with the Managers throughout the year in further
developing the investment strategy and underlying ESG policies.
This is not simply for the purpose of achieving the Company’s
investment objective but to do so in an effective, responsible and
sustainable way in the interests of shareholders, future investors,
tenants and society at large. The Company has borrowings and is
in regular communication with its three lenders to ensure that we
have a strong working relationship. Compliance with the borrowing
restrictions is monitored on an ongoing basis. The Company
entered into a new £320 million debt facility agreement with
Barclays and HSBC from September 2023.
The Managers work closely with our tenants and the
communities in which the Company’s assets are situated,
ensuring that strong relationships are in place and
communication lines are as open as possible. The significant
portfolio activities undertaken by the Managers can be found in
the Managers’ Review on pages 15 to 21.
The Board places great importance on communication with
shareholders. The Annual General Meeting is held in London
and provides a key forum for the Board and Managers to present
to shareholders on performance, along with future plans and
prospects for the Company. The Board continue to be available
to meet with shareholders as appropriate and the Company’s
brokers and the Managers meet regularly with shareholders and
their respective representatives; reporting back their views to the
Board. Shareholders may also communicate with the Board at
any time by writing to them at the Company’s registered office or
to the Company’s brokers. These communication opportunities
help inform the Board when considering how best to promote the
success of the Company for the benefit of all shareholders over
the long-term.
We have included on pages 23 to 28 additional information on
our approach towards environmental, social and governance
(ESG) matters. Through its formal ESG Committee and
supporting dialogue, Directors engage with the Managers
to establish an approach that is bespoke to the Company,
reflecting the nature of the property portfolio whilst integrating
neatly with the business model. Having established a suite
of core ESG pillars, the Company has set out a series
of commitments and targets which continue to evolve in
response to real estate market developments and in line with
stakeholder expectations. The Company continues to make
significant progress in this area.
The Company’s stakeholders are always considered when the
Board makes decisions and examples include:
Dividends
The Board recognises that providing an attractive level of
income with the potential for growth is important to the
Company’s shareholders. The rate of monthly interim dividends
was increased to 0.44
pence per share in October 2023. This
represented an increase of 10.0
per cent compared to the
prior monthly dividends and the dividends paid for the year
were 4.7
per cent higher than in 2022. Monthly dividends have
remained at this rate, however, with the dividend fully covered
and with further rental growth expected to materialise, the
Board will continue to keep the level of dividend under review.
Investor communications
The Managers have a team dedicated to fostering good
relations with institutional shareholders, wealth managers and
independent financial advisers and keeping investors regularly
informed, with the aim of promoting the Company’s investment
proposition and improving the rating of the Company’s share
price. This team organises meetings with these parties as
well as preparing webinars, interviews and videos which are
shared through various media channels. The team gathers
feedback and answers any queries in relation to the Company
and its investment strategy. Feedback from these activities
is reported regularly to the Board. In addition, the Strategic
Review will take into account the views of shareholders and all
shareholders are welcome to send their views on the Strategic
Review to chairmanBCPT@georgeson.com.
Promoting the Success of the Company
2023 Annual Report and Consolidated Financial Statements | 9
Tenants and the community
As long-term investors, we recognise the importance of not only
the landlord-tenant relationship, but also our obligation to the
communities in which we invest and the wider stakeholders
involved in the management of physical assets.
To ensure we provide a consistent, professional, and ever-
improving service to our occupiers, the Manager carries out
Occupier Wellbeing surveys on a three yearly basis to enable us
to track occupier satisfaction with both our physical assets and
the property management services we provide. This enables us
to establish and maintain long-term working relationships with our
occupier base and ensure that our real estate continues to evolve
with the requirements of its target occupiers. The last survey
was undertaken in 2022, which saw incremental improvement in
the number of occupiers positively endorsing the Company and
its
Manager.
The physical nature of real estate presents a variety of
opportunities to engage with and contribute to local communities.
This manifests itself most obviously at community-centred
assets like St Christopher’s Place, London and The Crescent,
Wimbledon. At St Christopher’s Place, we support initiatives such
as Accessible (an organisation catering for those with accessibility
needs) and the Sustainable City Charter (a pledge to reduce
carbon emissions from non-domestic premises). In Wimbledon, we
are partnered with Love Wimbledon to provide community events
and activities all-year round.
Not all assets offer the same scope of opportunity engagement.
However, the Company is Living Wage accredited, paying the living
wage to all directly-employed staff of our tenants and encouraging
its counterparties, such as occupiers and contractors to make
the same commitment. The recent refurbishment of Strategic
Park, Southampton provides an example of this community
engagement, with 70 per cent of sub-contractors sourced from the
local area and all staff engaged in the project paid the living wage.
Carbon stewardship
The Company recognises the impact of the built environment on
global carbon emissions and has committed to achieving net
zero carbon by 2040 or earlier. Net zero carbon assessments
have been completed across the portfolio, enabling us to
model the physical interventions required, their financial and
carbon impacts and aggregating the data at the portfolio level
to map out the Company’s pathway to net zero. The Science
Based Targets Initiative has independently verified our pathway
for the reduction of our landlord-controlled (Scope 1 & 2)
emissions and we continue our efforts to collect our (Scope 3)
occupier energy consumption data to understand our total
carbon footprint.
Our ability to make ESG-led interventions as an accretive
part of the asset life cycle, rather than as exceptional capital
expenditure, has been underlined by the refurbishment project
completed at Strategic Park, Southampton. The refurbishment
of this industrial holding delivered A-rated EPCs, a BREEAM
Very Good certification and a whole-roof solar photovoltaic
scheme, while also generating a capital return of 15.7 per cent
over the year. The delivery of solar installations where feasible
across the portfolio has been identified as a way of generating
on-site renewable energy, thereby diverting demand from the
grid, with the dual benefit of generating an income return for
the Company, with the installation at Southampton forecast to
deliver a yield of circa 7.5 per cent per annum.
As long-term investors we look to the future and to the role
and success of the Company in that context. We will continue
to work towards the optimal delivery of the Company’s
investment proposition and to promote the success of the
Company for the benefit of all shareholders, stakeholders and
the community at large. The Company aims to provide a clear
investment choice with access to a diversified, high quality and
sustainable
portfolio.
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Headlines and
Performance Summary
10 | Balanced Commercial Property Trust Limited
Strategic Report
Performance total return
*
1 Year
%
3 Years
%
5 Years
%
10 Years
%
Ordinary share price -12.5 +6.4 -25.6 -3.9
This measures the Company’s share price and NAV total return, which
assumes dividends paid by the Company have been reinvested, relative to the
Market benchmark.
Net asset value (‘NAV’) -3.3 +4.3 -6.2 +56.3
Portfolio return -0.7 +7.2 +2.0 +67.1
MSCI UK Quarterly Property Index -1.5 +4.7 +4.1 +68.4
FTSE All-Share Index +7.9 +28.1 +37.7 +68.2
Income return
*
1 Year
%
3 Years
%
5 Years
%
10 Years
%
Portfolio income return +5.4 +15.9 +26.5 +57.8
The income derived from a property during the period as a percentage of the property
value, taking account of direct property expenditure.
MSCI UK Quarterly Property Index +4.7 +13.5 +23.8 +56.3
Share price discount to NAV per share
*
As at:
31 Dec
2023
%
31 Dec
2022
%
31 Dec
2021
%
31 Dec
2020
%
31 Dec
2019
%
Discount (34.0) (25.3) (22.3) (31.9) (11.7)
This is the difference between the share price and the NAV per share. It can be an
indicator of the attractiveness for shares to be bought back or, in the event of a premium
to NAV per share, issued.
Expenses
Year to:
31 Dec
2023
%
31 Dec
2022
%
31 Dec
2021
%
31 Dec
2020
%
31 Dec
2019
%
Ongoing charges
*
1.54 1.39 1.31 1.13 1.19
This data shows whether the Company is being run economically. It measures the running
costs as a percentage of the average net assets. The ratio increased in 2023, primarily
due to a lower average net asset value.
Ongoing charges
excluding direct
property expenses
*
0.96 0.86 0.90 0.85 0.83
This data shows whether the Company is being run economically. It measures the
running costs excluding direct property expenses as a percentage of the average net
assets. The ratio increased in 2023, primarily due to a lower average net asset value.
Environmental performance
2023 2022 2021 2020 2019
Carbon emissions
(Scope 1 & 2)
(tonnes CO
2
e)
1,571 1,504 2,035 1,780 2,133
This indicates the absolute amount of greenhouse gas emissions associated with
the landlord’s operational activities across the portolio. The 2020 emissions were
influenced by coronavirus restrictions and the 2022 emissions have been revised
as
they were subsequently independently verified.
Proportion of demises
with EPC ratings of
A or B (%)
26 16 16 12 12
This provides an indication of the level of exposure to higher theoretical energy
efficiency attributes of the property assets.
Social performance
2023 2022 2021 2020 2019
Health & Safety 0 0 0 0 0
Number of notifiable incidents or statutory health and safety breaches in the
managed portfolio.
* See Alternative Performance Measures on pages 86 to 88.
Source: Columbia Threadneedle Investment Business, MSCI Inc and Refinitiv Eikon
The Board assesses its performance in meeting the Company’s objective against the following
key measures. Commentary can be found in the Chairman’s Statement, Managers’ Review and
Environmental, Social and Governance Report.
Key Performance Indicators
2023 Annual Report and Consolidated Financial Statements | 11
Strategic Report
As stated within the Report of the Audit and Risk Committee
on pages 41 to 43, the Board applies the principles detailed in
the internal control guidance issued by the Financial Reporting
Council and has established an ongoing process designed to
meet the particular needs of the Company in managing the
risks and uncertainties to which it is exposed.
It has been another challenging year, which continues to be
marked by an elevated cost-of-living and geopolitical events
such as the war in Ukraine and the escalation of tensions in
the Middle East. Against this background, we have continued
to see higher levels of inflation in the UK, albeit the rate has
slowed sharply as monetary policy continues to work through
the economy, and it is far from the 11.1 per cent peak in
October 2022. In response, the Bank of England continued to
raise interest rates which at the time of writing have stabilised
at 5.25 per cent. This volatile economic environment has had
an ongoing effect on many of our principal risks during the
year and the Board met regularly with the Managers to assess
these risks and how they could be managed. More detail is
included in the Chairman’s Statement on pages 3 to 5 and the
Managers’ Review on pages 15 to 21.
The principal risks and uncertainties faced by the Company are
set out in the table on pages 12 and 13 and in note 17, which
provides detailed explanations of the risks associated with the
Company’s financial instruments.
The Audit and Risk Committee seeks to mitigate and manage
these risks and uncertainties through continual review, policy-
setting and enforcement of contractual obligations, as well as
a review of the Internal Control reports prepared in accordance
with ISAE 3402 and AAF (01/20).
To mitigate investment and strategic risks the Board regularly
monitors the investment environment and the management
of the Company’s property portfolio. The Managers seek to
alleviate the portfolio risks through active asset management,
monitoring key risk metrics and carrying out due diligence
on prospective tenants and asset acquisitions. All of the
properties in the portfolio are insured.
As well as considering current risks, the Audit and Risk
Committee, Board and the Investment Managers carry out
a separate assessment of emerging risks when reviewing
strategy and evaluate how these could be managed or
mitigated. The line between current and emerging risks is
often blurred and many of the emerging risks identified are
already being managed to some degree where their effects are
beginning to impact.
The principal emerging risks identified are outlined below:
Economic and geopolitical events have been a catalyst for
higher levels of inflation and consecutive interest rate rises,
which have slowed economic growth. Interest rates have
increased from 0.25 per cent to 5.25 per cent in the last two
and a half years. The Bank of England held the rate at 5.25
per
cent at its September 2023 meeting, breaking the run of 14
consecutive hikes and consensus estimates are currently
forecasting a gradual cut in the base rate from the second half
of 2024. Against this background, sentiment for real estate as
an asset class has been poor, given the high income returns
available from cash and fixed income. Property valuations have
been marked down to reflect the risk premium for investing
in property (as an illiquid asset) in a higher interest rate
environment. In addition, the increased cost of debt has led to
weak liquidity in the real estate capital markets.
The ESG agenda is a very prominent one and continues to
grow in its importance to shareholders, future investors, our
customers and the wider community. As discussed in our
ESG report on pages 23 to 28, we have made significant
progress in this area and we intend to continue to do so. The
increasing market attention being paid to climate risk, to net
zero carbon ambition and to social impact have been notable
features of the evolving agenda over recent years and those
need to be considered more explicitly in property investment
and management activity. Failure to respond to the evolving
regulatory requirements and public expectations would be
reputationally damaging and could have a negative effect on
property valuations, leaving some properties difficult to let.
The structural change in the office market continues to
evolve following Covid-19. There is a clear focus on higher
quality space in central locations, as companies look to
offer a more structured hybrid model of operation where
strong ESG and wellbeing credentials are essential.
Each year the Board carries out a comprehensive, robust assessment of the principal risks and
uncertainties that could threaten the Company’s success. The consequences for its business model,
liquidity, future prospects and viability form an integral part of this assessment.
Principal Risks and Future Prospects
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12 | Balanced Commercial Property Trust Limited
Strategic Report
This
has been at the expense of lower quality stock and a
two-tier market has emerged with the rebasing of both capital
values and rents. This is still developing and continues to be
monitored but investor sentiment to offices is poor with few
active buyers in the market, and this is impacting on pricing.
There continues to be an increasing emerging risk from cyber
threats. As an externally managed investment company we are
dependent on the controls and systems of the Managers and
other third-party service providers. The Board reviews on an
annual basis, the systems and procedures that they have in
place to control these threats.
The principal risks and uncertainties faced by the Company, and the Board’s mitigation approach, are described below.
Highest Risks Mitigation
Investment Performance Risk
Unfavourable markets, poor
stock selection, including
inappropriate asset allocation
and underperformance against
the benchmark. This risk may be
exacerbated by gearing levels. The
outlook for the office sector capital
markets is challenging.
Economic backdrop of inflationary
pressures, higher interest rates and
the risk of an economic recession.
A relatively illiquid investment market.
ESG risk attached to the developing
regulatory backdrop and capital
expenditure required to maintain
compliance.
Increased in the year
under review
The investment performance, gearing and income forecasts are reviewed with
the Investment Managers at each Board Meeting. The Managers provide regular
information on the expected level of rental income that will be generated from
underlying properties.
The portfolio is well diversified by geography and sector and the exposure to individual
tenants is monitored and managed to ensure there is no over exposure. The Company
sold £14.3 million of offices during the year and exposure at the year-end was 26.5 per
cent. Post year-end, the Company sold a further £54.6 million of offices with the current
exposure at 22.2 per cent.
The Managers in-house ESG team continually monitor the regulatory background
and best practice standards, while the overall quality of the portfolio provides
some protection against this. All portfolio assets have been subject to Net Zero
Carbon assessments alongside modelling of the interventions required to meet
hardening Minimum Energy Efficiency Standards thresholds. All actions scheduled
for implementation in the 2023 financial year have been delivered or progressed as
detailed in the ESG Report.
There has been significant leasing activity and a number of lease renewals completed
during the year particularly in the industrial portfolio and St Christopher’s Place, which
has helped performance during a period of falling valuations. The portfolio offers
significant in-built income growth, as evidenced by the reversionary yield of 6.2
per cent.
Discount/Premium Risk
Share price of the investment
company is lower/higher than the
NAV. As a result of such imbalances,
the attractiveness of the Company to
investors is diminished.
The discount continues to be wide
(34
per cent at the year-end but
narrowing to 28.3 per cent on 25
April
2024) in an environment of higher
interest rates where high income
returns can be achieved through
cash and income products. Investor
sentiment towards real estate as an
asset class is relatively weak, and the
office sector in particular.
Unchanged in the year
under review
The discount is reported to and reviewed by the Board on an ongoing basis. Share
buybacks as a means of narrowing the discount or as an attractive investment for the
Company are considered and weighed up against the risks as alternatives. The position
is monitored by the Managers and Brokers on a daily basis and any material changes
are investigated and communicated to the Board. The Company has paused share
buybacks since September 2022, with the preservation of cash and maintaining lower
gearing levels taking precedence in current markets.
Investors have access to the Managers and the underlying team who will respond to
any queries they have on the discount. The Managers engage with the shareholder
base on a quarterly basis to update on Net Asset Value performance. The Managers
also attend ad hoc meetings with shareholders as required, as well as various industry
events to promote the Company to current and prospective investors.
The Brokers and the Managers’ sales team liaise with current and prospective
investors to try to generate demand for the Company’s shares.
2023 Annual Report and Consolidated Financial Statements | 13
Strategic Report
Highest Risks Mitigation
Financial Management Risk
Risk of financial or reputational
damage due to a failure to manage
appropriately financial risk. This
includes management of cash
resources and debt.
The company’s principal £260 million
debt facility expires on 31 December
2024 and a £100 million facility
with Barclays was due to expire in
July 2024. Early action on this was
required.
Decreased in the year
under review
The level of cash is continually monitored by the Managers. A financial model is maintained,
which includes a five-year cash flow forecast and is reviewed at quarterly Board meetings.
The cash position is also reviewed by the Board on a monthly basis as part of the
dividend approval process.
Loan covenants are monitored carefully by the Managers and reviewed at least
quarterly at Board meetings.
The Company entered into a two-year £320 million loan agreement in September 2023,
with the option of two one-year extensions. This is a two-tiered facility with Barclays and
HBSC which includes a £60 million revolving credit facility and a term loan which takes
the form of a commitment to provide up to £260 million to repay the existing loan with
L&G, which is due to mature in 2024. As part of this process, the £100
million facility
with Barclays was paid down and cancelled. In the current interest rate environment,
drawing down the new term loan in full will be more expensive than the current debt
and the interest would have to be fixed using an interest rate swap. The Company is
therefore looking to reduce its gearing exposure through property sales, and the new
loan provides optionality on the gearing levels post 2024.
Product Strategy Risk
Risk that the Product Strategy (including
investment guidelines and policies)
lacks sustainability or is no longer
appealing to the market.
Risk that the strategy is not clearly
defined/articulated or directed to the
correct target audience.
The Company has a Continuation vote
in 2024.
ESG related initiatives are a core part
of the long-term strategy.
This was recognised as a significant
area of risk for the Company in 2022
and the rating therefore remains
unchanged during the year.
Unchanged in the year
under review
The underlying investment strategy is kept under constant appraisal and the Board
has a strategy session annually, in conjunction with the Manager. The strategy
is communicated to interested parties on a regular basis via stock exchange
announcements, the interim and annual report and investor/consultant calls and visits.
The portfolio has a material exposure to the office sector which has underperformed.
The Manager has therefore commenced a rebalancing exercise and has sold £68.9
million of office property to date (£54.6 million of which was post year end), with further
sales in this sector anticipated.
The Continuation Vote and the Strategic Review, announced following the year end, are
covered on page 4 of the Chairman’s statement. The Board looks forward to updating
shareholders on the progress of the Strategic Review and the arrangements for the
Continuation Vote in due course, noting that there is currently no certainty as to the
outcome of the Strategic Review.
There is significant ongoing work on the Company’s ESG strategy. A peer-group leading
GRESB (Global Real Estate Sustainability Benchmark) score in 2023 underlines the efforts
made in ensuring ESG is fully integrated into the investment and management process.
ESG enhancements form a key element of asset-level strategies including the
degasification of buildings, the installation of solar photovoltaic systems and the
incremental improvements to energy efficiency through cyclical refurbishment of holdings.
Viability Assessment and Statement
The Board conducted this review over a five-year time horizon, a period thought to be appropriate for a Company investing in
commercial property with a long-term investment outlook and with an average unexpired lease length of 4.7 years. The Company
has its principal borrowings with L&G secured until 31 December 2024 and entered into a new agreement with Barclays and HSBC
in September 2023 for a term loan of up to £260 million which can only be used to repay the L&G loan. This new loan is currently
available until September 2025 with the option of two one-year extensions.
The Company is also subject to a Continuation Vote in 2024, which will be held after the completion of the Board’s Strategic
Review (expected to be in Q3 2024). The date of the vote is therefore yet to be determined. If the Continuation Vote is not passed,
the Directors are required to put forward proposals for the reconstruction, reorganisation or winding-up of the Company to the
shareholders for their approval within twelve months following the date of the Continuation Vote. These proposals may or may not
involve winding-up the Company or liquidating all or part of the Company’s then existing portfolio of investments and, accordingly,
failure to pass a Continuation Vote in 2024 will not necessarily result in the winding-up of the Company or liquidation of all or
some of its investments. Further information on the Continuation Vote and the Strategic Review can be found on page 4 of the
Chairman’s Statement. There is currently no certainty as to the outcome of the Strategic Review.
The Board’s assessment of going
concern can be found on page 35.
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Strategic Report
The Viability Statement has been prepared on the assumption that the Board recommends continuation of the Company in its
current form and that shareholders approve the Board’s recommendation. The assessment also takes into account the principal
risks and uncertainties faced by the Company, as identified on pages 12 and 13; which could threaten its objective, strategy, future
performance, liquidity and solvency.
The major risks identified as relevant to the viability assessment were those relating to a further downturn in the UK commercial
property market and its resultant effect on the valuation of the investment property portfolio, the level of rental income being received
and the effect that this would have on cash resources and financial covenants. The UK commercial real estate market has experienced
a downturn since the second half of 2022, driven by geopolitical challenges, high levels of inflation, rising interest rates and a slowdown
of economic growth. There has been a significant repricing of property valuations with the sector experiencing capital falls of 21.7 per
cent over the 18 months to 31 December 2023, as measured by the MSCI UK Quarterly Property Index (‘MSCI’).
A stress test has been conducted over the five-year period to April 2029, on very prudent assumptions. Taking into account that
the portfolio has already experienced a significant valuation adjustment in the last 18 months, the modelling uses a severe but
plausible downside scenario which takes into account the illiquid nature of the Company’s property portfolio, further significant
future falls in the investment property values, the availability of borrowings and substantial falls in property income receipts.
The viability assessment modelling used the following assumptions:
• The most negative of all property capital returns as measured by MSCI over one to seven years using historic data that goes
back to 1985, with capital values falling by as much as 36.6
per cent. This takes into account that the property market has
already experienced capital falls of 21.7 per cent in the last 18 months and therefore the most significant fall from the year
end is a further 14.9 per cent. Under this approach, there will also be years where a modest recovery is forecast.
• The full £260 million term loan with Barclays and HSBC is drawn down to repay the L&G loan at the end of 2024.
• Debt refinanced at 1 per cent above the current long-term debt forecasts and assumed to be available for the full
assessment period.
• Loan covenant tests remain the same as those currently in place following a refinancing of debt.
• Tenant defaults of 10 per cent for the first year, followed by 5 per cent for the following year before returning to normal levels thereafter.
• Tenant lease breaks are exercised at the earliest opportunity, followed by a substantial void period. From between 9 and
37 months (depending on the property).
• Dividends are maintained at current levels.
• Capital expenditure of c.£50 million over the 5 year period, including £4.5 million per annum relating to ESG related expenditure.
The results of this modelling were as follows:
NAV Dividend Cover LTV (Net)
2024 90.4p 67.8% 26.3%
2025 89.8p 47.6% 29.1%
2026 93.9p 56.9% 30.5%
2027 92.2p 82.8% 31.7%
2028 93.2p 93.4% 32.0%
Even under this negative scenario the Company remains viable with loan covenant tests forecast to be passed and the current
dividend rate maintained. The level of the NAV remains positive under this negative scenario. The Company continues to have
sufficient assets to ensure that it could pay down its debt in an orderly fashion through sales should it choose to do so and
would also have the option of reducing the level of dividends to preserve cash.
In the ordinary course of business, the Board reviews a detailed financial model on a quarterly basis, incorporating forecast returns for
the portfolio, projected out for five years. This model uses realistic assumptions and factors in any potential capital commitments.
The Company
’s £260 million loan with L&G is available until 31 December 2024. The market value of the properties secured
under this loan would have to drop by a further 20
per cent from 31 December 2023 valuations before breaching the Loan to
Value (‘LTV’) test on the facility. The loan interest cover test would only be breached by a fall in net rental income of 67
per cent.
We are comfortable that these covenants will continue to be met.
The Company’s £60 million revolving credit facility with Barclays and HSBC (£30 million of which was drawn down at the year end and
has subsequently been repaid) is forecast to meet covenant tests during 2024. The market value of the properties secured under
this loan would have to drop by 36
per cent from 31 December 2023 valuations before breaching the LTV test on the facility. The
loan interest cover test would only be breached by a fall in net rental income of 30
per cent. The Board is comfortable that these
covenants can continue to be met.
The Company has a further £68
million of properties which are not secured against any lender and could be transferred to the
lenders to support covenant tests if required.
Based on this assessment, and in the context of the Company’s business model, strategy and operational arrangements set
out above, the Directors have a reasonable expectation that the Company will be able to continue in operation and meet its
liabilities as they fall due over the five-year period to April 2029.
2023 Annual Report and Consolidated Financial Statements | 15
Strategic Report
Property Managers
The Company’s investment managers, Columbia Threadneedle Investment Business Limited and asset and property manager,
Columbia Threadneedle REP AM plc a subsidiary of Columbia Threadneedle Real Estate Partners LLP, and collectively, are referred
to in this document as ‘the Managers’. Columbia Threadneedle Real Estate Partners is a leading UK-based real estate manager
focused on commercial real estate investment management. The team behind Columbia Threadneedle Real Estate Partners has
been successfully managing commercial property assets for a wide range of UK clients for over 50 years and currently manages
some £7.5 billion of real estate assets (December 2023), employing over 100 experts. The team structure provides for sector
specific teams offering specialist capabilities across the market, establishing strong peer to peer and occupier relationships
and sourcing of a range of transactional opportunities. Columbia Threadneedle Real Estate Partners undertakes fund and asset
management services, property accounting and project management (where appropriate).
Property headlines over the year
l
A portfolio total return -0.7* per cent over the 12 months to 31 December 2023 versus the MSCI
UK Quarterly Property Index (‘MSCI’) return of -1.5 per cent.
l
Relative outperformance delivered through income generation and proactive asset management,
driving 5.3 per cent increase in portfolio net operating income.
l
Accretive asset management activity delivered underlines strong asset fundamentals, attractive
sector exposures and significant latent income growth potential within the portfolio.
l
Portfolio offers potential day one income reversion of 16.0 per cent with a further 31.0 per cent
of income subject to contractual uplifts guaranteeing additional rental growth.
l
The disposal of four office assets completed (two post year-end) as part of the strategic
repositioning of the portfolio, raising proceeds of £68.9 million delivered at an aggregate discount
to NAV of 2.6 per cent and reducing portfolio exposure to the office sector to 22.2 per cent.
l
Major development scheme at Strategic Park, Southampton completed, delivering a rent roll in
excess of £1.4 million per annum and a 12-month total return of 13.4 per cent.
* See Alternative Performance Measures on pages 86 and 88.
Richard Kirby, Fund Manager joined the predecessors to Columbia Threadneedle REP AM plc (‘CT REP’) in 1990.
He has been a fund manager since 1995 and has experience of managing commercial property portfolios across
all sectors for open-ended, closed-ended and life fund clients. He sits on both the Executive Committee, ESG
Committee and Investment Committee of CT REP. He is a Chartered Surveyor and a member of the Investment
Property Forum, the British Council of Offices and Retail Property Community (“Revo’’).
Managers’ Review
Daniel Walsgrove, Deputy Fund Manager assumed the role of Deputy Fund Manager in July 2022. Daniel qualified
as a Chartered Surveyor in 2013, holds a post-graduate diploma in Surveying - Real Estate from the College of
Estate Management and completed the CFA Level 4 Certificate in Investment Management (IMC) in August 2020.
Daniel has nine years’ experience working in the asset and fund management disciplines.
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Strategic Report
Property Market Review
2023 was a challenging year for UK real estate due to the
macro-economic environment and a 15 year high in interest
rates. Volatility in financial markets, uncertainty as to the interest
rate outlook and persistently high inflation dampened investor
appetite and the relative attractiveness of real estate.
UK real estate investment volumes totalled circa £40 billion in
2023, a fall of 40 per cent year on year. Despite the negative
headlines around offices, they were the second most traded
sector in 2023, accounting for approximately 24 per cent of
deal volume. The tentative emergence of counter-cyclical and
opportunistic strategies has been supported by an occupational
market that continues to display resilience and even growth,
albeit this is increasingly nuanced by micro-location and
asset
fundamentals.
As income has driven returns, we have seen an increasing
divergence in performance across the sub-sectors due to
differing rental growth prospects. As a result, weaker office
segments have lost market share to ‘beds, sheds, and meds’,
being the sectors delivering rental growth founded on structural
undersupply and positive thematic support. Industrials generated
the highest rental growth over the year at 7.1 per cent and
were unsurprisingly the most traded sector. Retail warehousing,
underpinned by low vacancy and a negligible development
pipeline, supported positive rental growth over the year of
1.8
per cent and is expected to gain further momentum in 2024.
All this is to say that delivering relative outperformance has
become a more nuanced pursuit founded on disciplined
management of both portfolio composition and the standing
asset base. The notable absence of the distressed (or even
motivated) selling of real estate assets has put the onus on
returns being generated through proactive asset management
and diversification of income streams. Crystallising rental
growth through leasing initiatives, driving capital growth through
refurbishments, enhancing occupational and investment
prospects through asset repositioning relies heavily on expertise
to leverage strong underlying asset and portfolio fundamentals.
Portfolio performance
The total return from the portfolio was -0.7 per cent over the
twelve months, compared with the MSCI return of -1.5 per cent,
a 74-basis point performance premium.
At a time when returns are driven by income, the Company’s
portfolio is generating a yield advantage and the portfolio
delivered an income return of 5.4 per cent over the year, a
75-basis point premium over the MSCI. The portfolio’s capital
growth was in line with MSCI at -5.9 per cent over the year.
Capital Growth
Over the period, portfolio yields have moved as follows:
Net initial yield
(%)
Equivalent yield
(%)
Reversionary yield
(%)
Dec 23 Dec 22 Dec 23 Dec 22 Dec 23 Dec 22
Industrial 4.5 4.5 6.0 5.9 6.3 6.2
Offices 7.4 5.8 8.2 6.9 8.4 7.0
Retail* 4.7 4.4 5.1 4.9 4.8 4.7
Retail Warehousing 6.3 5.7 6.2 6.1 6.1 6.0
Alternatives 4.8 4.5 4.7 4.5 4.6 4.5
Portfolio 5.5 5.0 6.5 6.1 6.2 5.8
*including St Christopher’s Place
At the sector level, the Company’s industrial, retail (including
retail warehousing) and alternatives holdings all generated
material relative capital outperformance over the index.
Performance at the portfolio level was impacted by offices,
which delivered relative capital underperformance against the
index of 503 basis points. The largest driver behind this was
the regional office assets, a sub-sector that faces investment
illiquidity, constrained transaction volumes and a muted
performance outlook.
Sector
Balanced Commercial Property Trust
MSCI UK
Quarterly
Index
Income
Return
(%)
Capital
Return
(%)
Total
Return
(%)
Total
Return
(%)
All Retail 4.9 -4.1 0.7 -0.3
Offices 7.1 -18.2 -12.2 -10.4
Industrial 4.7 3.0 7.9 3.9
Alternatives 4.9 -2.8 2.0 -0.1
All Property 5.4 -5.9 -0.7 -1.5
Income Return
Over the year the portfolio saw net operating income growth
of 5.3 per cent and generated ERV growth of 1.9 per cent.
The key driver of the increase in passing rent was active asset
management across the portfolio, as a total of 76 leasing
initiatives completed over the 12 months.
2023 Annual Report and Consolidated Financial Statements | 17
Strategic Report
Sector Analysis
as at 31 December 2023, % of total property portfolio
(figures as at 31 December 2022 in brackets)
Industrial 32.3% (28.9%)
Offices 26.5% (31.6%)
Retail 18.4% (17.4%)
Retail Warehouses 12.3% (11.6%)
Alternative 10.5% (10.5%)
Source: Columbia Threadneedle REP AM plc
Lease Expiry Profile
At 31 December 2023 the weighted average lease length for
the portfolio, assuming all break options are exercised, was
4.7 years (2022: 5.2 years)
% of leases expiring (weighted by rental value)
31 December 2023
31 December 2022
0
10
20
30
40
50
60
70
64.9%
40.1%
24.0%
36.7%
9.6%
15.0%
1.5%
8.2%
Lease length
0-5 years
5-10 years
10-15 years 15-25 years
Source: Columbia Threadneedle REP AM plc
Geographical Analysis
as at 31 December 2023, % of total property portfolio
(figures as at 31 December 2022 in brackets)
London – West End 28.7% (27.5%)
South East 24.2% (23.4%)
Midlands 23.3% (21.3%)
North West 12.5% (12.2%)
Scotland 7.3% (11.6%)
South West 2.2% (2.3%)
Rest of London 1.8% (1.7%)
Source: Columbia Threadneedle REP AM plc
The largest occupiers, based as a percentage of contracted
rent, as at 31 December 2023, are summarised as follows:
Income Concentration
Company Name
% of Total
Income
Apache North Sea Limited 4.6
CNOOC Petroleum Europe Limited 4.5
JPMorgan Chase Bank, National Association 4.5
Kimberly-Clark Limited 3.6
University of Winchester 3.6
Marks and Spencer plc 3.6
Virgin Atlantic Limited 3.5
Nestle Purina UK Commercial Operators Limited 3.2
Transocean Drilling U.K. Limited 3.2
DHL Supply Chain Limited 3.2
Total 37.5
Source: Columbia Threadneedle REP AM plc
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The portfolio vacancy rate rose slightly from 5.9 per cent by
Estimated Rental Value (ERV) to 6.7 per cent. 1.0 per cent
of the vacant space is now contractually committed and
4.3 per cent relates to Stockley Park in Uxbridge, which is a
repositioning opportunity. The uplift in the void rate is primarily
linked to two restaurant units at St Christopher’s Place where
leases have been forfeited due to the tenants breaching
lease obligations, although there is a good level of new tenant
interest in these units.
The portfolio has historically sustained a low long-term vacancy,
with the average over the last 5 years standing at 5.1 per cent.
The portfolio offers a potential income reversion of 16.0
per cent. It also offers an attractive mix of income duration
from its higher yielding assets and the opportunity to realise
performance from its growth assets. The portfolio’s WAULT
(weighted average unexpired lease term) stands at 4.7 years
(to lease breaks). The industrial assets offer the highest
income reversion of over 40 per cent, an equivalent yield of 6.0
per cent and a short WAULT of 2.5 years (including rent reviews
as lease events), enabling the reversion to be delivered at
lease events in the near term.
Approximately 31 per cent of the Company’s income profile
is subject to contractual uplifts offering guaranteed income
growth. Index-linked rent reviews support 8.8 per cent of the
income, while 22.2 per cent is subject to fixed uplifts.
The table below sets out an analysis of the portfolio’s income
reversion.
Income bridge
Rent per annum (£m)
£0.0
£10.0
£20.0
£30.0
£40.0
£50.0
£60.0
£70.0
£80.0
ERVDay 1
Income
reversion
Develop-
ment
Void
Units
Contracted
rent
Rent
free
Passing
rent
£1.48
£59.77
£4.63
£61.25
£1.60
£1.84
£69.32
Investment Activity
Despite a challenging investment market, we have successfully
completed the sale of four office holdings. Two of these
completed in December 2023, with further sales post year
end in January and March 2024. Three of the four sales have
been in the structurally challenged out-of-town business park
sub-sector, with the fourth being a low-yielding, multi-let office
in London’s West End. Following the completion of these four
disposals (two of these post year-end), the portfolio’s exposure
to the office sector has fallen to 22.2 per cent.
The assets sold are:
• Nevis & Ness House, Edinburgh Park – a 42,000 sq ft
headquarters office occupied by Diageo Scotland Limited.
• Building 4, Prime Four Business Park, Aberdeen – a
25,000
sq ft training centre occupied by Maersk Training
UK Limited.
• 2-4 King Street, London SW1 – a multi-let holding of
14,600
sq ft in London’s West End sold in January 2024.
• The Leonardo Building, Crawley – a 110,000 sq ft
headquarters office occupied by Virgin Atlantic Limited sold
in March 2024.
The sales have been completed at an aggregate price of
£68.9
million, representing a 2.6 per cent discount to the
valuation preceding the sales contracting.
The pricing achieved on these disposals underlines the value
in the Company’s investment ethos of focussing on high quality
real estate with strong fundamentals, which lends relative
resilience and liquidity. We are actively reviewing a pipeline
of further disposals from both the office sector and wider
portfolio, targeting assets where value can be crystallised
following the successful delivery of asset business plans.
Asset Management
Active asset management is the key determinant of relative
outperformance, enabling rental growth to be converted into
income while also generating capital growth through the
enhancement of asset leasing profiles.
Industrial and logistics
The Company’s industrial and logistics assets offer an
attractive day one income reversion and have generated
rental growth of 2.6 per cent over the twelve months.
A
number of highly accretive asset management initiatives
have been executed over the year, underpinning a 2.8 per
cent uplift in passing rent and supporting relative income and
capital
outperformance.
Notable successes included:
Hurricane 52, Estuary Business Park, Liverpool
The development of a highly specified 52,500 sq ft logistics
unit reached practical completion in August 2022. Following
a competitive best-bids process, the unit was let in July 2023
to clothing manufacturer Montirex on a 10-year lease (break
at year 5) at a rent showing a 7.2 per cent premium to the
ERV. The asset recorded a total return of 28.3 per cent over
the year.
2023 Annual Report and Consolidated Financial Statements | 19
Strategic Report
The Cowdray Centre, Colchester
This multi-let estate continues to see buoyant levels of occupier
activity, supported by a phased programme of refurbishments
which has driven renewed occupier demand, rental growth and
value appreciation.
The asset offers a day one income reversion of 44 per cent
and the staggered nature of the leasing profile is crystallising
this into performance. Rent reviews with Rexel UK and Jump
Street have seen rents increase by 66 per cent and generated
additional income totalling £69,500 per annum. Lease
renewals completed with The Range (CDS Superstores), Jayar
Components and Cowdray Carpet Centre have secured an
income stream totalling £425,000 per annum. In February
2024, MKM Building Supplies entered into a new 20-year lease
on a new refurbished unit, whilst lease renewal negotiations
continue with Pickfords Move Management and Hermes
Parcelnet, which will serve to further increase and strengthen
the asset’s income profile.
The estate also comprises a development site where planning
consent has been secured for a trade-centre scheme and the
construction package is currently out to tender.
8 Hams Hall Distribution Park, Birmingham
A bespoke logistics facility of 264,000 sq ft occupied by
Nestle Purina until March 2025. In August, Nestle completed a
1
0-year (break at year 5) reversionary lease from March 2025
in exchange for a 3.5 month rent free period.
Units 1 & 2 Strategic Park, Southampton
The major refurbishment of this two-unit industrial scheme
completed in October 2023 and both units have now been let
at rents ahead of pro-forma ERV’s. The initiative has delivered:
• Income performance, boosting the Company’s income by
in excess of £1.4m per annum and generating an uplift to
the previous combined passing rent of 27.5 per cent and
bettering the ERV underwritten in the asset business plan
by 2.4 per cent.
• Capital performance, as capital growth of 15.7 per cent
underpinned a total return of 13.4 per cent over a 12-month
period, and
• ESG enhancements delivering A-rated EPCs, a BREEAM
Very Good certification and a full solar photovoltaic system
installed on the roof. Both tenants have committed to
acquire the electricity generated on-site and the solar
installation is forecast to produce an additional operational
income return of circa 7.5 per cent per annum.
Over the course of 2024, industrial units with an ERV in
excess of £5.2m are subject to an upcoming or outstanding
lease event (including new leases completed post-period at
Colchester and Southampton as referenced above), offering a
meaningful opportunity to crystallise further income growth.
Retail Warehousing
A highly successful leasing strategy completed in 2022,
securing full occupation of both retail warehouse parks and
solidifying a robust grocery, discount and convenience-led
tenant roster. This has afforded the holdings an attractive,
stable, and growing income profile which has seen the passing
rent from the the Newbury and Solihull retail parks increase by
9.4 per cent over the year.
We are working to enhance the operational income further
through the addition of solar photovoltaic installations across
various retail units.
Offices
The Company’s office holdings continue to see robust levels
of occupational activity, with six new leases concluded,
representing a rent roll of £868,000 per annum, delivered
within 1.4 per cent of ERV. There have also been 3 rent
reviews settled at a 0.8 per cent premium to the previous
passing
rents.
7 Birchin Lane, London EC3
The portfolio’s sole City of London holding has been subject
to a phased programme of refurbishment, delivering Category
A ‘Plug & Play’ space along with upgraded ESG credentials
including B-rated EPCs. During the year, four suites have been
refurbished, three of which have been let at rents at a 10 per
cent premium to the ERV and the most recent letting on the
1st floor concluding at a rent showing a 17.6 per cent uplift to
the previous ERV.
King Street, Manchester
This multi-let office remains fully occupied, underlining the
continued appeal of this prestigious office building. Over the
course of the year, three existing tenants – Foresight Group,
Lloyds Bank and Markel Insurance – all committed to new
leases, securing a rent roll of £314,000 per annum, at a
0.7
per cent premium to ERV. Markel Insurance also settled
the September 2021 rent review on their second suite on the
11th
floor at a 1.3 per cent uplift.
Stockley Park, Uxbridge
This is the portfolio’s largest void with an ERV in excess of
£3.0m per annum. This former HQ office building is subject
to a repositioning strategy to convert the building to a post-
operative healthcare use. The local planning authority has
been engaged, offering in-principle support to the initiative and
a planning application has recently been submitted. During
2024 we expect to achieve a number of milestones allowing
for incremental crystallisation of value throughout the process,
such as the receipt of planning consent, the contractual
commitment of the occupier and the commencement of the
development phase.
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Retail
St Christopher’s Place (mixed-use Food & Beverage (‘F&B’),
retail, residential and offices)
This asset is a unique property; a prime Central London estate
comprising 172 lettable units and 40 buildings, diversified
across the retail, leisure, residential and office sectors
as
follows:
Sector
Exposure
(% of asset capital value)
Retail 31.2
Food & beverage 33.5
Offices 14.8
Residential 20.5
The estate is valued at a 23.7 per cent discount to its
pre
-pandemic level and therefore represents a key growth asset
as it moves through its recovery phase.
The West End retail market is enjoying a notable recovery, with
2023 footfall up 5 per cent year-on-year, while Oxford Street
outperformed and recorded a 12 per cent uplift in footfall
year-on-year. The 12 months saw growth in international travel
(+31
per cent) and hotel occupancy rates (+6 per cent), all
of which served to increase overall spend in the West End
by 4 per cent. As a result of an improving market backdrop,
Oxford Street saw a record year for new letting activity with
some 250,000 sq ft of deals completing, with the candy and
tourist shops that have blighted the street in recent years
having retrenched and the vast majority of all vacant space
to the west of Oxford Circus is either under offer or subject
to
redevelopment.
The St Christopher’s Place Estate is starting to see the benefits
of this wider recovery and over the twelve months we delivered
54 leasing initiatives across the estate, including 43 new
leases and tenancy agreements that account for an income
stream in excess of £2.4m. As a result of this the annual net
operating income increased by 5.1 per cent year-on-year and
there are a further 9 occupational deals under offer with legals
progressing.
Disappointingly, the tenants of the Estate’s Oxford Street
units, Aldo and Body Shop, have both entered administration
and ceased trading from their premises in recent weeks. As
a result, both Oxford Street units became empty post-period,
albeit remain subject to leases. The units are being actively
marketed and have received encouraging levels of occupational
interest at this early stage.
In order to drive continued income and capital growth a number
of key strategic initiatives are being progressed:
•
Enhancing the F&B offering.
The conversion of traditional retail to F&B drives investment
fundamentals through superior rents, longer leases and
sharper capitalisation rates, while also enhancing the
consumer experience and occupier dynamics of the estate.
Over the course of the year, F&B has become the dominant
use at the estate, increasing from 26.8 per cent to
33.5
per cent as 5 F&B occupational deals completed.
•
SCP as a West End office hub.
Occupier demand for smaller floorplates is predominantly
centred on fully fitted ‘Plug & Play’ space. Fitted space
increases the optionality for occupier demand and
materially reduces void periods, rent free periods and
achieves higher rents. We are proactively repositioning
suites to meet this key source of demand and since the
start of 2024, 11 new office tenancies have completed.
•
Leveraging improving occupational market dynamics to
enhance occupancy and income
The rebasing of occupational costs on Oxford Street has
spurred an increase in retailer demand. The Estate is
benefitting from this recovery and over half of the vacant
space at SCP is under offer at the time of writing. We are
seeking to leverage this momentum to continue to build
critical mass across the Estate’s retail, F&B and office
elements, with demand tension a key determinant of
rental growth.
Alternatives
The portfolio’s alternatives holdings include the purpose-built
student accommodation in Winchester (which is subject to
a long-term, index-linked lease to the university), residential
properties at St Christopher’s Place and the leisure units at
Wimbledon Broadway (a gym and cinema).
The residential element of St Christopher’s Place is substantial,
accounting for 4.7 per cent of the value of the Company’s
portfolio and saw its net operating income increase by 6.6 per
cent as occupancy and rental levels recovered.
Strategic Portfolio Initiatives
We believe the future drivers of relative outperformance
will
become increasingly nuanced. Allocation towards
structurally supported growth sectors remains critical,
however, the supply-demand dynamics within sub-sectors
(such as big-box vs mid-box industrial or discount vs fashion-
led retail), micro-locations (availability of workforce and areas
of meaningful undersupply such as along key arterial routes
or in last mile locations) and at the asset level (the long-
term functional relevance of the building) will all dictate the
consistent delivery of long-term outperformance.
2023 Annual Report and Consolidated Financial Statements | 21
Strategic Report
To that end, we will continue to leverage the portfolio’s strong
underlying fundamentals, with its attractive reversionary
potential and latent opportunities to deliver consistent
income growth as the key driver of total returns. Key strategic
initiatives include:
• Income compounding – the portfolio offers an attractive
income reversion alongside attributes supporting the
conversion of potential into growth. This includes a
consistently low void rate, high quality tenant base,
exposure to index-linked lease structures, a WAULT
facilitating the execution of asset management strategies
and a portfolio composition delivering continued
rental growth.
• Active asset management – a high quality portfolio
offers investment and occupational fundamentals that
support the delivery of value-add strategies, which are key
drivers of income and capital growth as well as relative
outperformance.
• Opportunistic recycling of capital– selective disposals
will continue to reduce the portfolio’s exposure to the
more challenging sub-markets, increasing the portfolio’s
alignment to growth sectors and assets.
Outlook
The macro-economic outlook improved materially towards the
end of 2023 driven by a significant fall in the rate of inflation
which raised expectations that the Bank of England would cut
the interest rate sooner than was expected just a few months
previously. However, while inflation has continued to moderate
it is still higher than the Bank of England’s 2 per cent target.
As a consequence, the Bank may not begin to cut rates until
inflation is closer to target and wage growth has cooled further.
Financial analysts are expecting to see a cut in the base rate
later this year.
Barring not insubstantial geo-political risk, possible interest
rate cuts during the year will bode well for property pricing
and allow the real estate market to look beyond this period of
relative stabilisation to a prospective recovery.
As for whether pricing has now bottomed out, the UK has seen
the strongest rebasing of valuations of all major European real
estate markets. While there may be some further softening
at the market level, we do not expect a substantial valuation
correction in 2024. Quality stock will most likely be less
affected than secondary assets where any repricing is expected
to be more aggressive. Downside risks remain, primarily the
potential for refinancing pressures to precipitate distressed
selling. However, we have not seen the levels of distress in real
estate markets that many had anticipated, and a more stable
economic outlook may result in a more manageable financial
environment.
Against this background and in a context where outperformance
is nuanced, the portfolio’s growth characteristics and high
quality, liquid asset base will continue to offer opportunities as
we aim to deliver attractive risk-adjusted returns.
Richard Kirby and Daniel Walsgrove
Columbia Threadneedle REP AM plc
26
April 2024
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Property Sector
Properties valued in excess of £200 million
London W1, St Christopher’s Place Estate (footnote 1 and 2) Retail/Office/Alternative
*
Properties valued between £50 million and £70 million
Solihull, Sears Retail Park Retail Warehouse
Newbury, Newbury Retail Park Retail Warehouse
Properties valued between £40 million and £50 million
London SW19, Wimbledon Broadway Retail/Alternative
**
Winchester, Burma Road Alternative
Properties valued between £30 million and £40 million
Chorley, Units 6 & 8 Revolution Park Industrial
Birmingham, Unit 8 Hams Hall Distribution Park Industrial
Markham Vale, Orion One & Two Industrial
Liverpool, Unit 1, G. Park, Portal Way Industrial
Daventry, Site E4, Daventry International Rail Freight Terminal Industrial
Birmingham, Unit 10a Hams Hall Distribution Park Industrial
Properties valued between £20 million and £30 million
London SW1, 2/4 King Street (footnote 3) Office
Crawley, The Leonardo Building, Manor Royal (footnote 4) Office
Manchester, 82 King Street Office
Southampton, Upper Northam Road, Hedge End Industrial
Bristol, One Cathedral Square (footnote 5) Office
Colchester, The Cowdray Centre, Cowdray Avenue Industrial
Aberdeen, Unit 2 Prime Four Business Park, Kingswells Office
Aberdeen, Unit 1 Prime Four Business Park, Kingswells Office
Properties valued between £10 million and £20 million
Burton on Trent, Quintus at Branston Locks Industrial
London W1, 17a Curzon Street Office
London EC3, 7 Birchin Lane Office
Aberdeen, Unit 3 Prime Four Business Park, Kingswells Office
Liverpool, Unit 1 The Hive, Estuary Business Park (footnote 5) Industrial
Birmingham, Unit 6a Hams Hall Distribution Park Industrial
Glasgow, Alhambra House, Waterloo Street Office
Camberley, Watchmoor Park, Building C Office
London W1, 16 Conduit Street (footnote 5) Retail
Properties valued under £10 million
Camberley, Affinity Point, Glebeland Road Industrial
Uxbridge, 3 The Square, Stockley Park Office
Liverpool, Hurricane 52, Estuary Business Park Industrial
Liverpool, Unit 2 & 4 The Hive, Estuary Business Park (footnote 5) Industrial
Solihull, Oakenshaw Road Retail Warehouse
Notes:
1 Mixed freehold/leasehold property.
2 For the purpose of the Company’s Investment policy, St. Christopher’s Place Estate is treated as more than one property.
3.
Property exchanged prior to year-end and was subsequently sold on 19 January 2024.
4.
Property sold post year-end.
5
Leasehold property.
* Mixed use property of retail, office and residential space.
** Mixed use property of retail and leisure.
Property Portfolio
as at 31 December 2023
2023 Annual Report and Consolidated Financial Statements | 23
Strategic Report
Key 2023 Highlights
2040
or sooner
Net Zero Carbon commitment
Validated last year’s application to the Science Based Targets Initiative
(SBTi) with an interim target of 46% reduction by 2030 set for scope 1
and 2 emissions.
79
100
GRESB performance
Achieved three green star status scoring 79 and first position in peer group,
improving from 70 and third position in the previous year.
Gold
award
EPRA sustainability reporting
Gold standard reflecting the level of ESG disclosure and transparency for the
fifth year in succession.
+4%
Carbon emissions (Scope 1 & 2)
4% increase in Scope 1 & 2 absolute emissions (-26% in 2022).
Emissions intensity reduced by 16% (-13% in 2022).
Renewable energy sources
94% of landlord procured energy supplied contracted on green tariffs
(100% in 2022).
Operational waste management
100% of waste material under landlord control continued to be diverted
from landfill.
A
GRESB Public Disclosure
‘A’ rating maintained for transparent public reporting.
Social impact
Retained formal accreditation from the Living Wage Foundation.
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Environmental, Social and Governance (ESG)
24 | Balanced Commercial Property Trust Limited
Strategic Report
A summary of the Company’s approach and progress against
its ESG commitments is set out below, whilst our 2023 ESG
Report will provide more granular detail on our activities,
performance and profile of the portfolio in respect of material
ESG factors.
Strategic direction
The four pillars of the Company’s ESG Strategy remain
consistent with previous years:
1. Leadership & effectiveness – measures through which
we will demonstrate effective governance in relation to
ESG criteria, a theme that is particularly pertinent to our
shareholders in the context of our outsourced investment and
property management arrangements.
2. Investment process – Procedures through which we
integrate ESG into the investment process, ensuring that
material factors are central to investment decision-making
and property management so that relevant risks to income
and long-term performance are addressed in a timely and
efficient manner.
3. Portfolio – attendance to and optimisation of material
ESG performance and risk factors across the portfolio, with
a particular emphasis on resource efficiency and renewable
energy, occupier wellbeing and satisfaction, managing
the implications of new regulations concerning minimum
energy standards for leased properties, and ensuring that
our properties are not used by organisations connected to
controversial activities.
4. Transparency – approach to investor reporting and public
disclosure on relevant ESG factors, including participation in
recognised industry reporting initiatives and through alignment
to applicable standards of best practice.
Further information on the Company’s ESG approach can be
found at balancedcommercialproperty.co.uk
How the Property Managers implement ESG
VISION ESG policy and approach
DIRECTION ESG strategic priorities
DELIVERY Operational tools and processes
MONITORING
Data capture and analysis
METRICS
ESG performance and disclosure
Leadership
Board Composition
The Company recognises the benefits of a diverse
Board membership and has met the Hampton-Alexander
recommendations by having at least 40% female representation
in 2023. This position aligns with the recommendations of the
FTSE Women Leaders Review and the voluntary target set for
FTSE350 Boards. The Company meets the recommendations
of the Parker review following changes to Board composition
effected in the early part of 2024. The changes in Board
composition implemented in the early part of 2024 has also
resulted in 60% female representation on the Board.
The importance of environmental and social factors, together with the management of those
factors through corporate governance, continues to strengthen within the UK commercial property
market. The Board and its Managers remain fully engaged in the consideration of ESG factors and
on the Company maintaining its strong commitment, recognising that proper integration of such
matters into regular business practice is fundamental to preserving asset worth and enhancing
shareholder value.
2023 Annual Report and Consolidated Financial Statements | 25
Strategic Report
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Global Real Estate Sustainability Benchmark (“GRESB”)
GRESB is the dominant global system for
assessing Environmental, Social and Governance
performance for real estate funds although it
is not without its limitations. The Company’s
ambition is to realise year-on-year improvement
in score and to focus particularly where it has direct landlord
control. In its sixth consecutive year of participation, the Company
achieved a score of 79 reflecting a 9 point increase compared
to the previous year and conferring three green star status.
The Company achieved top position in its peer group of listed
diversified portfolios.
Investment process
Responsible Property Investment Framework
The Managers’ Responsible Property Investment Framework
provides the structure around which various property teams
operate, reinforcing the concept that every individual has a
contribution to make towards the successful integration of
ESG matters into property investment activities. Our appraisal
process captures a range of ESG related metrics to produce a
detailed assessment of risk and opportunity in relation to factors
considered material to future investment performance, such
as carbon profile, Energy Performance Certificate ratings, green
building certifications, contamination and flood risk, as well as
opportunities to improve ESG performance. These outputs are
regularly reviewed and are fully integrated into individual annual
asset business plans to ensure that improvements in ESG
credentials can be fully considered. The process is similarly
applied to all potential acquisitions and developments so that
thoughtful consideration can be given to risks and opportunities
prior to executing transactions.
The framework provides a basis for classifying assets according
to key ESG characteristics. These help to inform materiality and
priority in terms of allocating resources and attention. Asset level
categorisation is made according to energy performance rating,
the degree of landlord procured energy consumption, and the
extent to which energy use intensity compares to the industry
benchmark for that building type.
Asset classification
(distribution by number of properties)
Priority 3: where the EPC is an A or B
rating and/or the landlord energy
spend is less than £50k per annum
and/or the EUI is within 10% of the
relevant CRREM benchmark
Priority 1: is where the EPC is an F or G
rating and/or the landlord energy
spend is greater than £50k per annum
and/or the EUI is greater than 50%
of the relevant CRREM benchmark.
Priority 2: is where the EPC rating is
either a C, D or E and/or the landlord
energy spend is between £0 and £50k
per annum and/or the EUI is between
10% and 50% of the relevant
CRREM benchmark.
Priority 3
Asset classifications
Priority 2
Priority 1
28%
41%
31%
Portfolio
Active management of the environmental impacts associated
with each property asset within the portfolio is a key activity
undertaken by the Company’s Property Managers. Aggregated
data taken from asset-level appraisals allows for close
monitoring of overall performance and the setting of resource
reduction strategies, objectives and targets.
Environmental impacts
The Company sets year-on-year intensity-based energy, carbon,
water, and waste reduction targets for landlord procured services
which it seeks to realise though active engagement with its
local facilities managers and occupier cohort. The Company
has worked hard to develop its strategy for achieving net zero
carbon emissions and has committed to realising this ambition
by 2040 or sooner. The Company has published its pathway
document which sets out the details of its proposed approach
and the metrics it intends to adopt in order to demonstrate
progress. Compared with the previous reporting year, scope 1
emissions have decreased by 5.1% whilst scope 2 emissions
have increased by 11.0%, largely due to refurbishment works
at Mason Road Colchester. Overall, there has been a 16%
reduction in scope 1 and 2 carbon emissions intensity whilst
absolute energy consumption remains broadly static over the
same period. More granular detail of performance over the last
twelve months can be found in the 2023 ESG Report.
Renewable energy sources
The Company has increased its focus on developing a pipeline
of potential opportunities for installing solar photovoltaic on
assets with adequate roof areas, looking to support net zero
carbon aspirations whilst harnessing the increased interest of
occupiers on account of rising energy costs.
In the meantime, in support of the wider transition towards
renewable energy and energy efficient building stock, the
Company has always looked to obtain renewable energy
supplies through Renewable Energy Guarantees of Origin
(REGO) contracts for all assets where it has responsibility for
procurement. During 2023, as a result of market volatility,
enhanced credit conditions, and some supplier reluctance to
renew existing contracts on similar terms, the Company had
to enter into contracts on standard tariffs for part of the year.
With energy market conditions stabilising, a return to full green
tariffs is anticipated in 2024.
Controversial activities
Understanding shareholder concerns and sensitivities towards
certain controversial activities, the Company has adopted a
policy which prohibits the execution of new lease contracts
with organisations connected to the production, storage,
distribution or use of controversial weapons. Throughout 2023,
the Company had zero exposure to such organisations.
Moreover, the Company monitors tenant mix on a regular
basis and exercises discretion when considering leasing to
organisations involved in other controversial activities such
as those associated with gambling, pornography and alcohol.
2023
Headlines and
Performance Summary
26 | Balanced Commercial Property Trust Limited
Strategic Report
The Company welcomes regular engagement with investors to
understand their expectations in this regard.
Transparency
CDP (formerly Climate Disclosure Project)
In line with its commitment, the Company submitted to the full
tier of the Climate Change module of CDP for the fifth year in
succession in August 2023. A rating of B to indicate the taking
of coordinated action on climate issues was achieved. This
rating is above the global average rating of C in 2023.
EPRA Sustainability Best Practice Recommendations
Recognising the value and importance of non-financial reporting,
the Company’s annual ESG Reports include disclosures which
are aligned to the 3rd Edition of the EPRA Sustainability Best
Practice Recommendations and which are available on the
Company’s website. Absolute energy and emissions, together
with water and waste data, have been independently verified by
Lucideon CICS Limited and the Company achieved a Gold EPRA
award for the quality and transparency of its annual ESG Report
for the fifth year in succession.
GRESB Public Disclosure
GRESB undertake an annual assessment of the level of
disclosure and transparency of public listed real estate
companies. In 2023 the Company maintained its A rating,
representing the highest level of transparency on environmental,
social and governance issues. This compares favourably with a
peer group average of B and a global average of B.
Taskforce for Climate-related Financial Disclosures (TCFD)
The Company acknowledges the recommendations of the
Financial Stability Board Task Force on Climate-Related
Financial Disclosures (TCFD). The Company has included TCFD
Disclosures from its 2023 ESG Report below.
Recommended disclosure Current arrangements Planned activity
Governance
Board’s oversight of
climate- related risks and
opportunities
The Manager’s ESG Team provides regular progress reports to the Investment Manager. The
Board is formally updated on material factors at quarterly Board Meetings. The Board’s ESG
Committee convenes formally at least three times a year to review ESG-related activity in more
detail. Less formal reviews occur on a monthly basis between the Manager and the ESG lead
director. Material matters are reported in the Annual Report which is closely aligned to the
2023 ESG Report. Both reports are reviewed and signed-off by the Board following discussion
with the Fund Manager.
The Board will receive regular
updates and drive improvement
across the relevant ESG factors
including progress towards its net
zero commitment.
Management’s role in
assessing and managing
climate-related risks and
opportunities
The Manager is responsible for ensuring climate-related risks and opportunities are integrated
into operational processes and asset management decisions. Recommendations are made to
the Board to target appropriate objectives and arrange measures necessary to fulfil these.
The Board’s ESG Committee will
continue to meet regularly to
receive formal progress updates,
informed and supported by
continuing monthly discussions.
Strategy
Climate-related risks
and opportunities the
organisation has identified
over the short, medium and
long-term
The two principal forms of climate-related risk pertinent to the Company are from the potential
exposure of its portfolio to the physical effects of climate change and from the growing
regulatory and market demands associated with the transition to a low-carbon economy.
Short-term: the key risks arise from changes to levels of flood risk and from the restrictions on
property transactions associated with building energy performance regulations in England &
Wales and Scotland. Risk profile changes are confirmed at least annually and documented in
each annual ESG Report.
Medium-term: work has been completed to understand the extent of the measures that would
need to be implemented by 2030 and beyond across the portfolio to ensure that energy
and carbon reduction levels are in line with the Paris Agreement on climate change, and the
climate-related credentials of premises remain attractive to future occupiers. Taking account
of reasonable assumptions for grid decarbonisation and future turnover in the portfolio,
the Company has ascertained that energy demand needs to reduce by approximately
3% per annum.
The completed analysis of the exposure of the portfolio to both physical and transitional
climate risks in the short, medium, and longer terms has and continues to be incorporated
into individual asset business plans and will contribute to wider considerations around
strategies to exploit opportunities and mitigate risk.
The Company will build on its
platform of detailed asset-level
assessments and analysis and
continue to monitor industry
developments relating to both
physical and transitional risk
exposure and evolve portfolio
considerations accordingly.
2023 Annual Report and Consolidated Financial Statements | 27
Strategic Report
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Notice of AGM Other InformationStrategic Report
Financial Report
Recommended disclosure Current arrangements Planned activity
Strategy (continued)
Impact of climate-related
risks and opportunities
on the organisation’s
businesses, strategy, and
financial planning
To date, the level of short-term risk facing the portfolio from physical climate risks has not
been deemed to have a substantive financial or strategic impact; most assets face low or
negligible flood risk, whilst insurance cover, contingency planning and property management
arrangements are considered adequate in this current context. We continue to monitor
changes of asset and portfolio-level flood risk on an annual basis. Analysis is undertaken in
more detail for the limited number of assets for which the level of risk is high. The Company
has expanded its analysis of transitional climate-related risks by considering and modeling
a number of scenarios. These are associated with i) the varying cost of decarbonisation in
the context of carbon pricing and taxation, ii) the fluctuating price of energy in the context of
future pricing and volatility and shifts in operational expenses, iii) the anticipated regulatory
minimum energy performance standards iv) the risk to income and cash flows from failure to
meet expected thresholds, and v) changes in occupier preferences and sentiment influencing
premises selection and impacting on rental yields and pricing.
The Company’s strategy and asset business planning has evolved to take account of both
physical and transitional climate-related risk and opportunities.
Building on the publication of its net zero carbon strategy, the Company commissioned individual
building assessments to understand technical feasibility and costs associated with potential
interventions. The outcomes have allowed for the development of individual action plans to be
incorporated into regular asset business planning activities, and has furthermore allowed for more
detailed transitional risk modeling to be undertaken at both asset and portfolio level.
The Company will continue to
reflect upon and update the
outputs derived from its physical
and transitional risk assessment
exercises and undertake
refinements as appropriate to
ensure ongoing relevance.
Resilience of the
organisation’s strategy,
taking into consideration
different climate-related
scenarios, including a 2°C
or lower scenario
A scenario-based analysis of physical climate risks together with an assessment of the
resilience of the Company’s strategy has determined the portfolio is well positioned to
mitigate short- and medium-term risks associated with overheating and cooling demands,
storm damage, soil shrinkage and heightened flood perils. Furthermore, scenario-based
analysis using the selected transitional risks identified above and framed in the accepted
orderly, disorderly and hot-house settings, has been modeled.
Through these exercises, the Company has identified assets more susceptible to risk and
financial impact and the importance of delivering on carbon-related strategies. The analysis
underpins the benefit of undertaking interventions, their timing and the returns on investment.
By implementing its net zero carbon execution strategy, and adopting industry accepted cost
profiling provided by MSCI in respect of decarbonisation, the Company can anticipate a 15%
reduction in the transition risk-specific Climate Value at Risk (CVaR).
The Company will continue to
monitor and finesse outputs in
line with industry developments
and any portfolio changes.
Risk Management
Organisation’s processes for
identifying and assessing
climate-related risks
Climate risks are integrated into multi-disciplinary company-wide risk identification,
assessment, and management processes and are considered at each key stage of the
property investment process, including:
•
Enhanced due diligence assessments when looking at potential real estate acquisitions,
including consideration of multiple flood risk factors, energy efficiency, metering and
ratings.
•
Climate adaptation and mitigation criteria are explored and integrated into refurbishment
specifications.
•
Regular reappraisal of the ESG (including climate-related) characteristics of assets held
by the Company, including reclassifying assets according to changes in their climate risk
profile in order to determine the frequency and extent of asset management routines and
interventions.
We will continue to review and
refine our acquisition due diligence
and operational approaches to
take fuller account of longer-term
climate risk factors, including:
•
Sensitivity to potential changes
in the cost and availability of
insurance cover.
•
Potential impacts on future
asset liquidity.
•
Potential effects of emerging
or escalating physical and
transitional risks.
Organisation’s processes for
managing climate-related
risks
Responsibility for managing climate-related risks across the portfolio rests with the Manager,
using the intelligence gained from enhanced due diligence and annual reappraisal of climate
characteristics at the individual asset level. Core risk management features of our asset and
property management procedures for all assets are:
•
Incorporating appropriate actions to mitigate climate-related risks and capture related
opportunities into Asset Business Plans.
•
Safeguarding the transition and physical risk resilience credentials of a property when
negotiating leases and considering applications for alterations, especially in relation to
energy performance ratings.
•
Targeting optimal performance and resilience outcomes when undertaking development or
refurbishment work.
We continue to refine specific
climate-related considerations
into our investment criteria for
acquisitions, hold/sell and
capital expenditure decisions.
Headlines and
Performance Summary
28 | Balanced Commercial Property Trust Limited
Strategic Report
Recommended disclosure Current arrangements Planned activity
Risk Management (continued)
How processes for
identifying, assessing, and
managing climate- related
risks are integrated into the
organisation’s overall risk
management
Ownership and management of all risks, including climate-related risks, is the responsibility
of the Manager, who in reporting to the Board, is responsible for ensuring the operational
effectiveness of the internal control systems.
We will continue to deliver briefing
and training sessions to our asset,
property, and project managers
so they are aware of risks and
opportunities and recommended
actions for improving the resilience
of individual assets.
Metrics & Targets
Metrics used by the
organisation to assess
climate-related risks
and opportunities in line
with its strategy and risk
management process
Financial category: Expenditures (Energy/Fuel):
• Total electricity consumption (kWh)
• Like-for-like total electricity consumption (kWh/%)
• Total fuel consumption (kWh)
• Like-for-like total fuel consumption (kWh/%)
• Building energy intensity (kWh/m² NLA)
Financial category: Expenditures (GHG emissions):
• Emissions from Scope 1 consumption (kgCO
2
e)
• Change in emissions from Scope 1 consumption (%)
• Emissions from Scope 2 consumption (kgCO
2
e)
• Change in emissions from Scope 2 consumption (%)
• Emissions intensity for Scope 1 & 2 (kgCO
2
e/m² NLA)
• Change in emissions intensity from Scope 1 & 2 consumption (%)
Financial category: Expenditures (Water):
• Water consumption (m
3
)
• Change in water consumption (m
3
/%)
• Water intensity (m³/m² NLA)
• Change in water intensity (%)
Financial category: Assets (Location):
•
Flood risk distribution of portfolio for fluvial flooding, pluvial flooding, groundwater flood risk
(% capital value, # assets)
•
Historic flooding (% capital value, # assets)
Financial category: Assets (Risk Adaptation & Mitigation):
• Proportion of assets that are BREEAM rated (% NLA)
• Distribution of EPC ratings (% rental value, % NLA)
• Number of assets in which HVAC systems use HCFC coolants (# assets)
We will continue to monitor and
refine the metrics we use to
assess climate-related risks and
opportunities.
Disclose Scope 1, Scope 2,
and, if appropriate, Scope
3 greenhouse gas (GHG)
emissions, and the related
risks
Disclosures are shown in the 2023 ESG Report. Disclosed annually in the Annual
Report & Accounts from 2024.
Targets used by the
organisation to manage
climate-related risks
and opportunities and
performance against
targets.
Short-term:
•
We have established annual targets to reduce landlord energy consumption on a like-for-
like basis by an average of 3% across the portfolio.
•
In parallel, we have established a target of having renewable electricity supplies for all
landlord-procured power.
Medium-term:
•
We worked with Verco Advisory to set our target for reducing the energy intensity of the
portfolio by 20% per square metre by 2031, against a 2016 baseline, for landlord-procured
energy. Subsequently, we applied to and received validation from the Science Based Targets
Initiative (SBTi) in respect of the approach to achieving an interim target reduction of 46%
in Scope 1 and Scope 2 emissions by 2030 compared to a 2019 baseline.
Long-term:
•
We worked with Cundall to establish the Company’s 2019 carbon emissions and use as a
baseline for developing a net zero carbon ambition, strategy and pathway in line with real
estate industry developed expectation. The Company has set its net zero carbon target as 2040
or sooner. The Company worked with Carbon Intelligence (now part of Accenture) to obtain
detailed asset-level assessments and enable the formulation of net zero carbon pathways for
individual property assets, in line with its recently published net zero carbon strategy.
The Company will continue
to closely monitor and track
performance of properties
compared to individual asset-
level plans and industry level
trajectories, and will continue
to evaluate any need to refine
or re-base targets in line with
industry landscape or market
expectations.
Governance Report Auditor's Report
Notice of AGM Other InformationStrategic Report
Financial Report
Headlines and
Performance Summary
Constructed circa 1995 and acquired by the Company in
April 2005, this asset is strategically located within half
a mile of junction 7 of the M27 motorway and comprises
two industrial buildings totalling 126,500 sq ft arranged
over two floors, benefitting from low site cover and over
200 car parking spaces.
Following Amazon and MediaKind lease expiries the
asset was subject to a significant refurbishment strategy
designed to deliver high-quality product with an improved
rental tone and capital value alongside strong ESG
characteristics.
Executive summary
A strategic refurbishment and redevelopment of a two-unit industrial scheme with an overall budget of circa £5.6m delivering
strong financial performance alongside excellent ESG credentials:
• A high-quality, future-proofed end product in a core location, with excellent prospects for securing quality occupiers on a
long-term basis.
• Fully committed to occupiers within 3 months of practical completion at rents representing an uplift to the previous
passing rent of 27.5% and bettering the ERV underwritten in the asset business plan by 2.4 per cent.
• Strong capital growth performance of 15.7% from the asset over the 12 months to December 2023.
• Significant ESG enhancements including A-rated EPCs, BREEAM Very Good certification and a whole-roof solar photovoltaic
scheme generating an additional investment yield forecast at 7.5% per annum.
• Exceeding typical industry practice standards in relation to embodied carbon, circular economics, physical & mental
wellbeing, and social & community value.
ESG additionality in summary
A
EPC ratings achieved
for both units
1593
solar voltaic panels installed
generating up to 800,000 kWh
of renewable energy
24
electric vehicle charging points
representing 11.5% of available
parking spaces
99%
of construction waste
diverted from landfill
0.47
tonnes of construction waste per 100m
2
of gross area exceeding target of
1.2 tonnes per 100m
2
of gross area
55
cycle storage spaces created
equating to one space
per 21m
2
of office area
70%
of sub-contractor staff employed
from local area in addition to 100%
of main contractor staff
8
apprentice/traineeship staff
engaged on project representing 8%
of the total project workforce
42
Considerate Contract Scheme
score against an aspirational
target of 39
Spotlight on Southampton,
Units 1&2 Hedge End, Strategic Park
Strategic Report
2023 Annual Report and Consolidated Financial Statements | 29
30 | Balanced Commercial Property Trust Limited
Strategic Report
Delivering improved sustainability credentials
Project description
In broad terms, the scheme consisted of the modernisation of
both warehouse units and their associated two-storey ancillary
office facilities and included for:
• the demolition and removal of extensive internal
partitioning and equipment.
• the overhaul of the external building envelope and fabric,
including the provision of additional loading capacity.
• the provision of new building services.
• the reconfiguration of extensive external production yard
areas, parking, and landscaping.
BREEAM rating
Both units in the scheme achieved a Very Good rating under the independent BREEAM assessment.
Energy Performance Certificate
The removal of gas and the introduction of efficient lighting, air source heat pumps and most significantly, a large array of rooftop
solar photovoltaic panels resulted in both units significantly improving their energy efficiency ratings, with energy efficiency ratings
of A being achieved in each case.
On-site renewable energy sources
The scheme included the installation of rooftop solar photovoltaic
panels in parallel with general roof fabric improvement and rooflight
replacement, the latter providing for better insulation and natural lighting
and thereby reducing future occupier energy demand for heating and
artificial light. With just under 1,600 solar panels installed across
both units, the expectation is that some 750,000 kWh of energy will
be generated on-site per annum. Whilst both prospective tenants have
agreed to take the energy produced by the solar panels, the precise
demand of incoming occupiers is not yet known. The value of the
energy produced is forecast to show a 7.5% yield on cost. The system
will divert energy demand from the grid and preserve the ability to sell
excess energy generated back to the grid. Supplementing the focus on
energy demand reduction, energy efficiency and renewable sources, the
asset now benefits from 24 electric vehicle charging points representing
11.5% of the 207 spaces available.
2023 Annual Report and Consolidated Financial Statements | 31
Strategic Report
Governance Report Auditor's Report
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Headlines and
Performance Summary
Occupier comfort and wellbeing
The scheme focussed significantly on providing a range of obvious and
less obvious facilities that can support occupier comfort and wellbeing.
Both units together provide 55 cycle storage spaces which at one space
per 21m
2
of office area comfortably exceeds industry standards for short
and long-term provision.
Meanwhile, the design confirms that for regularly occupied space
the maximum distance to a window does not exceed 7.5m in any
circumstance and therefore exceeds the aspirational target that at least
95% of occupied office space is within this distance of a view outside.
The scheme provided neat additions in the form of covered external
breakout hubs, complete with power and USB ports powered from renewal
sources through integrated bespoke solar panels.
Biodiversity
The scheme focussed heavily on retaining and improving the woodland,
shrubs and rough grasslands that surround the site given their potential
to support birds, bats, badgers, and reptiles. Some shrubs have been
introduced to provide suitable foraging and nesting habitat for some
widespread bird species.
Perhaps more pertinently, as an industrial site with operational noise
pollution, the retention and effective management of the trees and
shrubs to the south of the site provide a natural suppressant for noise
transmission which is particularly relevant to the residential areas located
immediately adjacent to the southern boundary.
Social and community value
The Company was pleased to encourage and see a discernible focus on the social and economic elements of ESG integrated
into the construction project. Rates of pay at or above the Real Living Wage levels were applied to all staff engaged by the main
contractor and its supply chain. Moreover, all staff engaged during the entire project were resident in the local area whilst 70% of
sub-contractors and suppliers were local to the site, thereby supporting businesses and the economy in the region.
Expanding the localism theme to wider support for young people, of the 98 employees engaged on the project, four were on
traineeships representing 4% of total site staff, whilst 4% of staff were on apprenticeship programmes. The main contractor also
engaged with two local primary schools to deliver talks to Key Stage 2 pupils on health and safety and the opportunities in the
construction industry generally.
The scheme delivered a Considerate Contractors Score of 42 being ahead of the aspirational target set of achieving greater
than 39.
32 | Balanced Commercial Property Trust Limited
Governance Report
Paul Marcuse
Status: Chairman of the Board and the
Nomination Committee and an Independent
non-executive Director
Date of appointment:
12 January 2017
Country of residence: UK
Experience:
Paul Marcuse has over 40 years’
experience in the real estate and finance
sectors. He was Head of Global Real Estate at
UBS Global Asset Management between 2007
and 2012. Prior to this, he was Chief Executive
of AXA Real Estate Investment Managers.
Other public company directorships: None.
John Wythe
Status: Independent non-executive Director
and Chairman of the Management Engagement
Committee
Date of appointment:
11 September 2018
Country of residence: UK
Experience: John Wythe has over 40 years’
experience in the real estate industry and was
until December 2010, a Director and Head
of Fund Management of Prudential Property
Investment Managers Limited, now M&G Real
Estate.
He has been a Board member of the Church
Commissioners and is currently Chairman of
the Trustees of The Portman Estate and has a
number of other non-executive appointments,
primarily involving real estate.
Other public company directorships: None.
Linda Wilding
Status: Independent non-executive Director
and Chairman of the ESG Committee
Date of appointment:
3 June 2019
Country of residence: UK
Experience: Linda Wilding qualified as a
chartered accountant with Ernst & Young, before
working in the private equity division of Mercury
Asset Management from 1989 to 2001, rising
to the position of Managing Director. She has
served as a non-executive director on the
boards of a number of companies.
Other public company directorships:
Chairman of Odyssean Investment Trust PLC
and a non-executive Director of Sherbourne
Investors (Guernsey) C Limited.
Isobel Sharp
Status: Independent non-executive Director,
Chairman of the Audit and Risk Committee and
Senior Independent Director (with effect from
23 February 2024)
Date of appointment:
8 November 2022
Country of residence: UK
Experience: Isobel has extensive accounting,
auditing and corporate governance experience.
She was with Deloitte LLP as the firm’s Senior
Technical Partner until 2012. She has served
as President of The Institute of Chartered
Accountants of Scotland and on the UK
Accounting Standards Board and the Financial
Reporting Review Panel. Isobel was awarded
the CBE in 2009. Isobel is currently an
independent non-executive member at Baillie
Gifford & Co and was formerly a NED at the UK
Green Investment Bank plc and at the global
asset manager, Winton Group Ltd.
Other public company directorships: IMI plc.
Karima Fahmy
Status: Independent non-executive Director
Date of appointment: 19 January 2024
Country of residence: UK
Experience: Karima is a corporate lawyer
with extensive experience of the UK property
sector. During her executive career, she
worked at Grosvenor Group (“Grosvenor”), the
international property group, latterly as General
Counsel until 2020. Prior to Grosvenor, Karima
worked at Hogan Lovells, the international
law firm, advising both listed and unlisted
companies.
Other public company directorships: The PRS
REIT plc
Directors
2023 Annual Report and Consolidated Financial Statements | 33
Governance Report Auditor's Report
Notice of AGM Other InformationStrategic Report
Financial Report
Governance Report
Headlines and
Performance Summary
Statement Regarding Annual Report and Consolidated
Financial Statements
Following a detailed review of the Annual Report and
Consolidated Financial Statements by the Audit and Risk
Committee, the Directors consider that taken as a whole, it is
fair, balanced and understandable and provides the information
necessary for shareholders to assess the Company’s
performance, business model and strategy. In reaching this
conclusion, the Directors have assumed that the readers of
the Annual Report and Consolidated Financial Statements
would have a reasonable level of knowledge of the investment
industry in general and the investment company and real
estate sector in particular.
Results and Dividends
The results for the year are set out in the attached
consolidated financial statements.
The Group paid interim dividends during the year ended
31 December 2023 as follows:
Interim Dividends 2023
Payment
date
Rate per
shares
Ninth interim for prior year 31 January 2023 0.40p
Tenth interim for prior year 28 February 2023 0.40p
Eleventh interim for prior year 31 March 2023 0.40p
Twelfth interim for prior year 28 April 2023 0.40p
First interim 31 May 2023 0.40p
Second interim 30 June 2023 0.40p
Third interim 31 July 2023 0.40p
Fourth interim 31 August 2023 0.40p
Fifth interim 29 September 2023 0.40p
Sixth interim 31 October 2023 0.44p
Seventh interim 30 November 2023 0.44p
Eighth interim 29 December 2023 0.44p
Three further interim dividends, each of 0.44p per share, were
paid on
31 January 2024, 29 February 2024 and 28 March
2024. The twelfth interim dividend in respect of the year, of
0.44p per share, will be paid on 30 April 2024 to shareholders
on the register on 12 April 2024.
Dividend Policy
As a result of the timing of the payment of the Company’s
monthly dividends, the Company’s shareholders are unable to
approve a final dividend each year. As an alternative the Board
therefore proposes to put the Company’s dividend policy to
shareholders for approval on an annual basis. Resolution 3
which is an ordinary resolution, relates to the approval of the
Company’s dividend policy which is as follows: Dividends on the
Ordinary Shares are payable as interim dividends.
Principal Activity and Status
The Company is a Guernsey-incorporated company (registered
number 50402) and, during the financial year, carried on
business as a closed-ended property investment company.
The Company’s shares are traded on the Main Market of the
London Stock Exchange.
The principal activities of the Company’s subsidiaries are that
of an investment and property company.
The Group elected into the UK REIT regime on 3 June 2019.
Remuneration Report
The Directors’ Remuneration Report, which can be found
on pages 44 and 45, provides detailed information on the
remuneration arrangements for Directors of the Company,
including the Directors’ Remuneration Policy. The Directors
Remuneration Policy is approved by shareholders every three
years and was last approved by shareholders at the AGM
on 31 May 2023. There have been no changes to the policy
since that date. Remuneration is set at a level commensurate
with the skills and experience necessary for the effective
stewardship of the Company and the expected contribution of
the Board as a whole in continuing to achieve the investment
objective. It is intended that this policy will continue for the
three-year period ending at the AGM in 2026. Shareholders will
be asked to approve the Remuneration Report (Resolution 2).
The Directors submit the Annual Report and Consolidated Financial Statements of the Company
for the year ended 31 December 2023. This Report; Director’s biographies; Corporate Governance
Statement; Report of the Audit and Risk Committee; and the Remuneration Report collectively make
up the Governance Report.
Directors’ Report
34 | Balanced Commercial Property Trust Limited
Governance Report
Directors
The names of the Directors who have held office during the
year, along with their biographical details, are set out on
page 32. The Directors currently in office will stand for election
or re-election by Shareholders. Following a review of their
performance, the Board believes that each of the Directors
standing for election or re-election has made a valuable
and effective contribution to the Company. The skills and
experience each Director brings to the Board for the long-term
sustainable success of the Company are set out below. The
Board recommends that Shareholders vote in favour of the re-
elections of the Directors (Resolutions 4 to 7) and election of a
Director (Resolution 8).
Resolution 4 relates to the re-election of John Wythe who has a
wealth of experience in property investment having spent over
40 years’ in the real estate and financial services industry.
Resolution 5 relates to the re-election of Paul Marcuse who
has served over seven years and brings in-depth expertise and
experience with over 40 years’ of working in the real estate and
finance sectors.
Resolution 6 relates to the re-election of Linda Wilding who is
a qualified Chartered Accountant and has worked in the asset
management industry for many years. She has significant
experience of being on Boards in both executive and non-
executive capacities.
Resolution 7 relates to the re-election of Isobel Sharp who
joined the Board in November 2022. Isobel has extensive
accounting, auditing and corporate governance experience and
has served as a Director on a number of Boards.
Resolution 8 relates to the election of Karima Fahmy who
joined the Board in January 2024. Karima is a corporate lawyer
with extensive experience of the the UK property sector.
There are no service contracts in existence between the
Company and any Director but each of the Directors has been
issued with and accepted the terms of a letter of appointment
that sets out the main terms of his or her appointment.
Amongst other things, the letter includes confirmation that the
Directors have a sufficient understanding of the Company and
the sector in which it operates and sufficient time available to
discharge their duties effectively, taking into account their other
commitments. These letters are available for inspection upon
request at the Company’s registered office.
Management
The Board has appointed Columbia Threadneedle Investment
Business Limited (referred to throughout this document as ‘the
Investment Managers’) as the Company’s investment managers
and Columbia Threadneedle REP AM plc (referred to throughout
this document as ‘CT REP’ or ‘the Property Managers’) as
the Company’s property managers. The Investment Managers
and CT REP are both part of the Columbia Threadneedle
Investments (‘CTI’) and, collectively, are referred to in this
document as ‘the Managers’. The Investment Managers were
appointed as the Company’s AIFM on 18 July 2014.
The Managers provide investment management and other
services to the Company. Details of the arrangements between
the Company and the Managers in respect of management
services are provided in note 3 to the consolidated
financial statements.
The Board keeps the appropriateness of the Managers’
appointment under review. In doing so the Board reviews
performance quarterly and considers the past investment
performance of the Company and the capability and resources
of the Managers to deliver satisfactory investment performance
in the future. It also reviews the length of the notice period of
the investment management agreement and the fees payable
to the Managers, together with the standard of the other
services provided.
As highlighted on page 38, the Board considers the
recommendations of the Management Engagement Committee.
In the light of performance in 2023, the increasing scope
and resources of the Manager and the outcome of the
independent fee review there is no pressing need to change
the management arrangements. However, this will be kept
under review during the Strategic Review and the forthcoming
Continuation Vote.
Depositary
JPMorgan Europe Limited acts as the Company’s depositary
in accordance with the AIFM Directive. The depositary’s
responsibilities, which are set out in an Investor Disclosure
Document on the Company’s website, include cash monitoring,
segregation and safe keeping of the Company’s financial
instruments and monitoring the Company’s compliance with
investment limits and leverage requirements.
Taxation
As set out in note 6 of the consolidated financial statements,
the Company and its subsidiaries are exempt from Guernsey
taxation under the Income Tax (Exempt Bodies) (Guernsey)
Ordinance 1989. No charge to Guernsey taxation will arise on
capital gains.
The Group elected to join the UK REIT regime on 3 June 2019
and the Group’s property income and gains are exempt from
UK corporate taxes provided a number of conditions in relation
to the Group’s activities are met including, but not limited to,
distributing at least 90% of the Group’s UK tax exempt profit as
property income distributions (‘PIDs’). The residual business in
the UK is subject to UK tax as normal.
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Financial Report
Headlines and
Performance Summary
Shareholders who are in any doubt concerning the taxation
implications of a REIT should consult their own tax advisers.
The Board is fully committed to complying with applicable
legislation and statutory guidelines, including the UK’s Criminal
Finance Act 2017, designed to prevent tax evasion in the
jurisdictions in which the Company operates.
Share Structure
As at 31 December 2023 there were 701,550,187 Ordinary
Shares of 1 pence each in issue and 97,815,921 shares held
in treasury. Subject to the Articles of Incorporation, all issued
shares rank equally for dividends and distributions and carry
one vote each and there are no restrictions concerning the
transfer of Ordinary Shares in the Company. Shares held in
treasury have no voting rights and are not entitled to dividends.
The Company is not aware of any agreements between the
holders of the ordinary shares which may restrict the transfer
of the shares or voting rights and there is no agreement which
the Company is party to that affects its control following a
take-over bid.
Substantial Interests in Shareholdings
As at 31 December 2023 the Company had received
notification of the following holdings of voting rights (under
the Financial Conduct Authority’s Disclosure Guidance and
Transparency Rules):
Substantial Shareholdings
Number of
Ordinary Shares
Held
Percentage
Held
*
Aviva Group 162,585,829 23.2
BlackRock 40,466,576 5.8
Investec Wealth & Investment Limited 38,619,738 5.5
* Based on 701,550,187 Ordinary Shares in issue as at 31 December 2023.
Since the year-end, the Company has been notified of a
reduction in BlackRock’s shareholdings to 39,461,945 Shares
(5.6 per cent of the shares in issue). No other new holdings
have been notified by a cut off date of 12 April 2024.
Accounting and Going Concern
Shareholders will be asked to approve the adoption of the
Annual Report and Consolidated Financial Statements at the
AGM (Resolution 1). The Consolidated Financial Statements,
starting on page 54, have been prepared in accordance and
in compliance with current International Financial Reporting
Standards as adopted by the EU and The Companies
(Guernsey) Law, 2008 as amended. The material accounting
policy information of the Group is
set out in note 1 to the
consolidated financial statements. The unqualified auditor’s
opinion on the consolidated financial statements appears on
pages 47 to 53.
In assessing the going concern basis of accounting the
Directors have had regard to the guidance issued by the
Financial Reporting Council. They have reviewed detailed
cash flow, income and expense projections in order to assess
the Company’s ability to pay its operational expenses, bank
interest and dividends. The Directors have examined significant
areas of possible financial risk including cash and cash
requirements, refinancing of loans and review of the debt
covenants, in particular those relating to loan to value and
interest cover. At 31 December 2023, the Company was in
a net current liability position because the current L&G term
loan is due for repayment in December 2024. In September
2023, the Company signed up to a new £260 million term
loan with Barclays/HSBC which can only be drawn to repay
the current L&G term loan. The new term loan agreement
expires in September 2025 and has the option of two one-
year extensions. Furthermore the Directors note that section
9 of the Association of Investment Companies’ Statement of
Recommended Practice states it is usually more appropriate to
prepare financial statements on a going concern basis unless a
Continuation Vote has been held and shareholders have voted
against continuation. On this basis, the Board believes it is
appropriate to adopt the going concern basis in preparing the
financial
statements.
Although the Board is confident that the Company will have
sufficient financial resources to meet its obligations due
within twelve months from the date of approval of the financial
statements, as disclosed on page 4 the Continuation Vote
is due to take place in 2024. If the Continuation Vote is not
passed by shareholders then the Board will be required to bring
proposals to shareholders that may include a restructuring or
wind down of the Company in its current form. The Directors
note that the ultimate decision on the future state of the
Company is outside the control of the Directors and will be
known only after the Continuation Vote. The uncertain future
outcome of the Continuation Vote and the impact this has
on the Company’s future state indicates the existence of
a material uncertainty that may cast significant doubt on
the Company’s ability to continue as a going concern. The
Company’s longer-term viability is considered in the Viability
Assessment and Statement on pages 13 and 14.
Strategic Review
As announced on 15 April 2024, the Board is undertaking
the Strategic Review to consider the future of the Company
and is exploring the various strategic options available to
enhance value for shareholders. The Company is continuing
to work towards delivering on its investment objective. Further
information on the Strategic Review can be found on page 4.
36 | Balanced Commercial Property Trust Limited
Governance Report
Modern Slavery Act 2015
As an investment vehicle the Company does not provide
goods or services in the normal course of business and does
not have customers or employees. Accordingly, the Directors
consider that the Company is not required to make any slavery
or human trafficking statement under the Modern Slavery Act
2015. The Managers, however, provide goods and services and
are required to make a statement under the Modern Slavery
Act 2015 which is available on the Managers website at
columbiathreadneedle.co.uk.
Annual General Meeting
The Notice of the Annual General Meeting, to be held on
20 June 2024 is set out on pages 82 to 83.
Reappointment of Independent Auditor and Auditor’s
Remuneration
PricewaterhouseCoopers CI LLP have expressed their
willingness to continue in office as the Company’s auditor and
a resolution proposing their re-appointment will be submitted
at the Annual General Meeting and for Directors to determine
their Remuneration (Resolutions 9 and 10).
Directors’ Authority to Allot Shares
Resolution 11 seeks an authority from shareholders to allow
the Directors to allot shares up to an aggregate nominal
amount of £701,550, being equivalent to approximately 10 per
cent of the issued ordinary share capital of the Company
(excluding treasury shares) as at 25 April 2024.
Resolution 12 seeks an authority from shareholders to
disapply pre-emption rights in relation to the issue of shares for
cash (including by way of a sale of treasury shares) as set out
in the Listing Rules made by the Financial Conduct Authority
under Part VI of the Financial Services and Markets Act 2000
(as amended). Resolution 12 gives the Directors, for the period
until the conclusion of the Annual General Meeting in 2025 or,
if earlier, on the expiry of 15 months from the passing of the
resolution, the necessary authority either to allot securities
or sell shares held in treasury, otherwise than to existing
shareholders on a pro-rata basis, up to an aggregate nominal
amount of £701,550. This is equivalent to approximately
10 per cent of the issued ordinary share capital of the
Company (excluding treasury shares) as at 25 April 2024.
The Directors will only allot new shares pursuant to the
authority granted by Resolutions 11 and 12, Guernsey law
and the authority to allot shares contained in the articles of
incorporation of the Company if they believe it is advantageous
to the Company’s shareholders to do so. Shares will be
issued at above Net Asset Value per share and under no
circumstances should that result in a dilution to the net asset
value per share.
Directors’ Authority to Buyback Shares
The Company did not buy back any shares during the year.
The current authority of the Company to make market purchases of
Ordinary Shares expires at the end of the Annual General Meeting
and Resolution 13, as set out in the notice of the Annual General
Meeting, seeks renewal of such authority until the earlier of the
Annual General Meeting in 2025 and 18 months from the passing
of the resolution. Any buyback of Ordinary Shares will be made
subject to Guernsey law and within any guidelines established
from time to time by the Board and the making and timing of any
buybacks will be at the absolute discretion of the Board. Purchases
of Ordinary Shares will only be made through the market for cash
at prices below the prevailing net asset value of the Ordinary
Shares (as last calculated) where the Directors believe such
purchases will enhance shareholder value. The price paid will not
be less than the nominal value of 1p per share. Such purchases
will also only be made in accordance with the rules of the Financial
Conduct Authority which provide that the price to be paid must not
be more than the higher of (i) 5 per cent above the average of the
middle market quotations (as derived from the Daily Official List of
the London Stock Exchange) for the Ordinary Shares for the five
business days before the shares are purchased; and (ii) the higher
of the last independent trade and the highest current independent
bid on the trading venue which the purchase is carried out. Any
shares purchased under this authority will be cancelled or held in
treasury. Shares will only be re-issued out of treasury at a premium
to the net asset value.
Disclosure of Information to the Auditor
The Directors who held office at the date of approval of this
Report of the Directors confirm that:
• so far as the Directors are aware, there is no relevant audit
information of which the Company’s auditor is unaware; and
• each Director has taken all the steps that he or she ought
to have taken as a Director to make himself or herself
aware of any relevant audit information and to establish
that the Company’s auditor is aware of that information.
Recommendation
The Directors consider that the passing of each of the
resolutions to be proposed at the Annual General Meeting
is in the best interests of the Company and is most likely to
promote the success of the Company, for the benefit of its
members as a whole, and they unanimously recommend that
all Shareholders vote in favour of these resolutions.
On behalf of the Board
Paul Marcuse
Chairman
26
April 2024
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Financial Report
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Performance Summary
Introduction
The Company is a member of the Association of Investment
Companies (‘the AIC’). The Board has therefore considered
the principles and recommendations of the AIC Code of
Corporate Governance issued in February 2019 (‘the AIC
Code’) by reference to the AIC Corporate Governance Guide
for Investment Companies issued at the same time (‘the
AIC Guide’). The AIC Code, as explained by the AIC Guide,
addresses all the principles and provisions set out in the UK
Corporate Governance Code issued by the Financial Reporting
Council in July 2018 (‘the UK Code’), as well as setting out
additional principles and recommendations on issues specific
to investment companies. The AIC Code also incorporates
a framework of best practice for Guernsey-domiciled
member companies.
The Board considers that it is appropriate to report against
the principles and recommendations of the AIC Code, and
by reference to the AIC Guide (which incorporates the UK
Corporate Governance Code).
In September 2011 (amended February 2016), the Guernsey
Financial Services Commission issued a Finance Sector Code
of Corporate Governance (‘the GFSC Code’). As the Company
already reports against the AIC Code and the UK Corporate
Governance Code it is deemed to meet the requirements of
the GFSC Code and has therefore not reported further on its
compliance with that code.
Since all the Directors are non-executive, in accordance
with the AIC Code and the preamble to the UK Corporate
Governance Code, the provisions of the UK Corporate
Governance Code on the role of the chief executive and, except
in so far as they apply to non-executive Directors, on Directors’
remuneration, are not relevant to the Company, and are not
reported on further.
Copies of both codes may be found on the respective websites:
theaic.co.uk and frc.org.uk
AIFMD
The Company is defined as an Alternative Investment Fund
(“AIF”) under the AIFMD issued by the European Parliament,
and which has been implemented into UK law. This requires
that all AIFs must appoint a Depositary and an Alternative
Investment Fund Manager (“AIFM”). The Board remains
fully responsible for all aspects of the Company’s strategy,
operations and compliance with regulations. The Investment
Managers are the Company’s AIFM.
Articles of Incorporation
The Company’s Articles of Incorporation may only be amended
by special resolution at general meetings of Shareholders.
The Board
The Company’s Articles of Incorporation require all Directors
to retire by rotation at least every three years. However, in
accordance with the recommendations of the AIC Code and
the UK Corporate Governance Code the Board has agreed
that all Directors will retire annually and, if appropriate, seek
re-election.
The Board, which is composed solely of independent non-
executive Directors, regularly reviews the independence of its
members. All the Directors have been assessed by the Board
as remaining independent of the Managers and of the Company
itself; each remains independent in character and judgement
with no relationships or circumstances relating to the Company
that are likely to affect that judgement.
The following table sets out the Directors’ meeting attendance
in 2023.
Directors’ attendance in 2023
Board
Audit
and Risk
Committee
Nomination
Committee
Management
Engagement
Committee
ESG
Committee
No. of meetings 4 4 2 2 3
T Clark
(1)
2 2 1 1 2
J Wythe 4 4 2 2 2
P Marcuse
(2)
4 n/a 2 2 3
L Wilding 4 4 2 2 3
H Scott-Barrett
(3)
4 4 2 2 3
I Sharp 4 4 2 2 3
K Fahmy
(4)
n/a n/a n/a n/a n/a
(1)
T Clark retired from the Board on 31 May 2023
(2)
P Marcuse retired from the Audit and Risk Committee on 17 June 2021 upon
his appointment as Chairman of the Board, although he does attend the
meetings.
(3)
H Scott-Barrett retired from the Board on 23 February 2024.
(4)
K Fahmy was appointed to the Board on 19 January 2024.
In addition to the scheduled meetings detailed above, there were a
further 20 ad-hoc Board Meetings held during the year, primarily to
cover the approval of monthly dividend payments; discuss the new
debt facility and property sales; and sign off announcements and
reports. There was also an annual strategy session.
Corporate Governance Statement
38 | Balanced Commercial Property Trust Limited
Governance Report
As an externally managed investment company, all the
Directors are non-executive and there are no employees.
Paul Marcuse, as Chairman, is responsible for the leadership
and management of the Board and for promoting a culture of
openness, challenge and debate.
Until his retirement in February 2024, Hugh Scott-Barrett was
the Senior Independent Director. From this date Isobel Sharp
then agreed to become the Senior Independent Director and
acts as an experienced sounding board for the Chairman or as
an intermediary for shareholders. She also leads the annual
evaluation of the Chairman.
Individual Directors may, at the expense of the Company, seek
independent professional advice on any matter that concerns
them in the furtherance of their duties. The Company maintains
appropriate directors’ and officers’ liability insurance.
The basis on which the Company aims to generate value over
the longer term is set out in its objective and investment policy
as contained on page 6. A management agreement between the
Company and Investment Managers sets out the matters over
which the Managers have authority and the limits beyond which
Board approval must be sought. All other matters, including
investment and dividend policies, corporate strategy, gearing,
corporate governance procedures and risk management, are
reserved for the approval of the Board of Directors. The Board
meets at least quarterly and receives full information on the
Company’s investment performance, assets, liabilities and other
relevant information in advance of Board meetings.
Conflicts of interest
A company director has a statutory obligation to avoid a
situation in which he or she has, or potentially could have, a
direct or indirect interest that conflicts with the interests of
the Company (a “situational conflict”). The Board therefore
has procedures in place for the authorisation and review of
situational conflicts relating to the Company’s Directors.
Other than the formal authorisation of the Directors’ other
directorships and appointments, no authorisations have
been sought. They are reviewed throughout the year at each
Board meeting. Aside from situational conflicts, the Directors
must also comply with the statutory rules requiring company
directors to declare any interest in an actual or proposed
transaction or arrangement with the Company. In the year
under review there have been no instances of a Director being
required to be excluded from a discussion or abstain from
voting because of a conflict of interest.
Committees
Throughout the year a number of Committees have been in
place. Those Committees are the Audit and Risk Committee,
the Management Engagement Committee, the Nomination
Committee and the ESG Committee. The Committees operate
within clearly defined terms of reference which are available for
inspection upon request at the Company’s registered office.
As stated in the Remuneration Report on pages 44 and 45,
the full Board determines the level of Directors’ fees and
accordingly there is no separate Remuneration Committee.
Audit and Risk Committee
The Report of the Audit and Risk Committee is contained on
pages 41 to 43.
Management Engagement Committee
The Management Engagement Committee comprises all the
Directors and is chaired by Mr J Wythe.
The Board keeps the appropriateness of the Managers’
appointment under review. In doing so the Board reviews
performance quarterly and considers the past investment
performance of the Company and the capability and
resources of the Managers’ to deliver satisfactory investment
performance in the future. It also reviews the length of the
notice period of the investment management agreement and
the fees payable to the Managers’ together with the standard
of the other services provided.
In a challenging year for absolute returns from the market and the
Company’s property portfolio, whilst quarter on quarter returns
have shown marginal levels of over and under performance of
the MSCI UK Quarterly Property Index, the overall total return in
2023 exceeded the Index (+0.8 per cent) as does the total return
over three years (+0.9 per cent). The Directors also note that the
income component of return in 2023 showed out performance of
+0.75 per cent against the MSCI UK Quarterly Property Index.
The integration of the Company’s asset and property manager,
Columbia Threadneedle REP AM plc with Columbia Threadneedle
Real Estate Partners LLP in December 2023 increases the
Managers’ scope and resources. Pending the outcome of the
Strategic Review and in light of the forthcoming Continuation
Vote, the Directors currently consider that continuity of the
management arrangements is appropriate.
In 2023, the Directors engaged an external consultant, bfinance,
to carry out a review of the appropriateness of the Managers’
fees. The conclusion of this review is that the management fee
is considered competitive relative to the peer group. However,
it was noted that there is developing evidence of increased
alignment in fee structures. With this in mind, the Directors
intend to discuss with the Managers whether fees can be
modified to achieve better alignment with the Company’s strategy
and shareholder returns.
Nomination Committee
The Nomination Committee comprises all the Directors and
is chaired by Mr P Marcuse. The Board considers that, given
its size, it would be unnecessarily burdensome to establish
a separate nomination committee which did not include the
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entire Board and believes that this enables all Directors to be
kept fully informed of any issues that arise.
The Committee is convened for the purpose of ensuring that
plans are in place for orderly succession for appointment to
the Board. Appointments to the Board are based on merit,
but in considering appointments the Nomination Committee
also takes into account the ongoing requirements of the
Company and the need to have a balance of skills, experience,
independence, diversity (including gender, race, ethnicity,
religion, sexual orientation, age, physical ability, educational,
professional or socio economic background) and knowledge of
the sector within the Board. As remuneration is an important
consideration for Board recruitment and retention, the
Committee also reviews the level of Directors salaries and
makes a recommendation on this each year to the Board.
The Board is conscious of the diversity targets set out in the
FCA Listing Rules and the Board complies with the AIC Code
of Corporate Governance in appointing appropriately diverse,
independent non-executive Directors who set the operational
and moral standards of the Company. The Board will always
appoint the best person for the role and will not discriminate
on the grounds of gender, race, ethnicity, religion, sexual
orientation, age, physical ability, educational, professional
or socio economic background. Whenever there are new
appointments, the new Directors receive an induction from
the Managers and Company Secretary on joining the Board.
All Directors receive other relevant training, collectively or
individually, as necessary.
The Committee used an independent recruitment consultant
Fletcher Jones, who have no connection with the Company or
any Director, for the latest Board appointment. The Committee
interviewed a number of potential candidates after producing a
short list from an extensive long list, provided by the consultant.
The Committee evaluated the balance of skills, experience and
knowledge that the candidates could bring to the Board as well
as giving consideration to diversity.
The performance of the Board, Committees and individual
Directors is evaluated annually through an assessment
process, led by the Chairman. The performance of the
Chairman is evaluated by the other Directors, led by the Senior
Independent Director. Every three years the performance of
the Board, Committees and individual Directors is assessed by
an external Board consultant, who carries out an independent
external Board evaluation. This process was last conducted in
2021 and involved the consultant (Condign Board Consulting)
attending and observing at a Board meeting and interviewing
the individual Directors and representatives of the Managers.
A comprehensive report was produced which provided
valuable feedback on what worked well, along with some
recommendations which the Board welcomed and accepted.
A
further external review will commence in 2024.
Board Diversity
In accordance with Listing Rule 9.8.6R (9), (10) and (11) the Board
has provided the following information in relation to its diversity.
Board Gender
(1)
Number of
Board
members
Percentage
of the Board
Number
of Senior
Positions on
the Board
As at 31 December 2023
Men 3 60% 2
Women 2 40%
(2)
–
(3)
As at 25 April 2024
Men 2 40% 1
Women 3 60%
(2)
1
(3)
(1)
The Company has opted not to disclose against the number of Directors in
executive management as this is not applicable for a real estate investment trust.
(2)
This meets the Listing Rules target of 40% during the financial year. In addition,
post year-end, Karima Fahmy (female) has been appointed to the Board and Hugh
Scott-Barrett (male) has resigned.
(3)
The two senior positions are: Chairman of the Board and the Senior
Independent Director. At 31 December 2023, this was less than the Listing
Rules target of 1. At the year-end, the process of recruiting a new Director
was underway. Post year-end, Isobel Sharp was appointed as the Senior
Independent Director following the resignation of Hugh Scott-Barrett and the
Company met the Listing Rules target of 1.
Board Ethnic Background
(1)
Number of
Board
members
Percentage
of the Board
Number
of Senior
Positions on
the Board
As at 31 December 2023
White British or other White
(including minority-white
groups)
5 100% 2
(2)
Other Ethnic Groups –
(3)
– –
As at 25 April 2024
White British or other White
(including minority-white
groups)
4 80% 2
(2)
Other Ethnic Groups 1
(3)
20% –
(1)
The Company has opted not to disclose against the number of Directors in
executive management as this is not applicable for a real estate investment trust.
(2)
The two senior positions are: Chairman of the Board and the Senior
Independent Director.
(3)
At 31 December 2023, this was less than the Listing Rules target of 1. At the
year-end, the process of recruiting a new Director was underway. Post year-end,
Karima Fahmy has been appointed to the Board and the Company met the
Listing Rules target of 1.
The information included in the above tables has been obtained
following confirmation from the individual Directors. As shown
in the above tables, the Company met the gender target for
the year ended 31 December 2023 and post year-end, met
the ethnic background target and women in senior positions.
No diversity policy is applied to the individual Committees given
the fact the full Board are members of all Committees (with the
exception of the Chairman who is not a member of the Audit
and Risk Committee, although he does attend those meetings).
40 | Balanced Commercial Property Trust Limited
Governance Report
The Board will continue to take all matters of diversity into
account as part of its succession planning.
Environmental, Social and Governance (‘ESG’)
Committee
ESG remains an important consideration in the Company’s
forward strategy and the Board remains fully committed and
engaged with its Managers in supporting the right approaches
and methodologies to enable continued advancement. The
Board therefore established an ESG Committee in 2022, which
comprises all Directors and is chaired by Mrs L Wilding. In
addition, the Chairman of the Committee meet the Managers’
ESG team on a monthly basis to review its action plan, to which
the other Directors are invited.
The Committee has been set up to oversee the formulation
of the Group’s ESG policy and strategy and makes
recommendations to the Board. This includes oversight and
review of the Managers’ implementation of the Group’s ESG
policy and strategy and monitoring their performance against,
and progress in addressing, the Board’s ESG priorities.
The Committee receives updates and reports on developments
in relation to legal and regulatory requirements and industry
standards and guidelines applicable to ESG matters which may
impact the Group’s business and the implementation of its ESG
strategy. It also oversees compliance with applicable legal and
regulatory requirements and industry standards and guidelines
relevant to ESG matters.
The Committee oversees the Group’s engagement with its key
stakeholders on ESG matters, including shareholders and the
investment community generally. It ensures that stakeholders
receive appropriate communications and information about
the Group’s ESG initiatives, activities and performance, and
monitors the impact of the approach with key stakeholders.
This includes reviewing the extent and effectiveness of the
Group’s external reporting of its ESG performance and its
participation in any external benchmarking initiatives.
Relations with Shareholders
The Company proactively seeks the views of its shareholders
and places great importance on communication with them. The
Board receives regular reports from the Managers and brokers
on the views of shareholders, and the Chairman and Senior
Independent Director, along with all other Directors, are keen to
meet with the major shareholders at least annually and make
themselves available to meet shareholders when required to
discuss any significant issues that have arisen and address
concerns and queries. The Notice of Annual General Meeting to
be held on 20 June 2024
is set out on pages 82 and 83. It is
hoped that this will provide a forum, both formal and informal,
for shareholders to meet and discuss issues with the Directors
and Managers of the Company. The Annual Report and Notice
of Annual General Meeting are posted to shareholders at least
20 working days before the Annual General Meeting.
On behalf of the Board
Paul Marcuse
Chairman
26
April 2024
2023 Annual Report and Consolidated Financial Statements | 41
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Financial Report
Headlines and
Performance Summary
The Committee and its Role
The Audit and Risk Committee comprises all the Directors
except the Chairman of the Board who has attended all
meetings over the year. The members consider that collectively
they have the skills, experience and objectivity to be an
effective committee. The Committee was chaired by Trudi Clark
until her retirement on 31 May 2023. From 31 May 2023,
Isobel Sharp was appointed to the role of Chair. Isobel who is
a Chartered Accountant and also a member of the Chartered
Governance Institute is considered by the Board to have
recent and relevant financial experience. She was, prior to
her non-executive career, with Deloitte LLP and has served as
President of The Institute of Chartered Accountants of Scotland
and on the UK Accounting Standards Board and the Financial
Reporting Review Panel.
The Committee meets at least three times in the year
including two meetings with the external auditors
PricewaterhouseCoopers CI LLP (‘PwC’). The attendance of
each of the members is set out on page 37.
In accordance with its terms of reference, the Audit and Risk
Committee considered and reviewed the following matters and
reported thereon to the Board:
• the annual and interim reports and financial statements;
• the accounting policies of the Group, including the
implications of new accounting standards and relevant
regulatory changes;
• the principal risks faced by the Group;
• the design and effectiveness of the Group’s internal
controls: and
• the effectiveness of the external audit process, the
independence and objectivity of PwC and their re-
appointment, remuneration and terms of engagement.
Reports and Financial Statements
Noted in the table below are the significant accounting matters considered during the year. Of particular attention has been the
assessment of the Group’s adoption of the going concern basis for accounting and its viability report. The Committee has reviewed
and challenged the assumptions therein.
Significant Matters Considered by the Audit and Risk Committee in Relation to the Financial Statements
Matter Action
Going concern and viability review
The Group is subject to a continuation vote in 2024. Further
information on the Continuation Vote can be found on page
4.
The Audit and Risk Committee recognises that the Continuation
Vote and its potential consequences create a material uncertainty
that may cast significant doubt over the Company’s ability to
continue as a going concern which should be highlighted in
considering the adoption of the going concern basis in the financial
statements and in presenting the Viability Statement. The Board
has highlighted this in the going concern disclosure on page 35.
The Committee also considered the Strategic Review announced
by the Company following the financial year end, noting that there
is currently no certainty as to the outcome of the Strategic Review.
Further information on the Continuation Vote and the Strategic
Review can be found on page 4. The Committee has reviewed
the wording of the Going Concern and Viability statements in this
report to ensure that the information is presented fairly.
Report of the Audit and Risk Committee
42 | Balanced Commercial Property Trust Limited
Governance Report
Matter Action
Valuation of the Investment Property Portfolio
The Group’s property portfolio accounted for 93.7 per cent of
its total assets as at 31 December 2023. Although valued by
an independent firm of valuers, CBRE Limited, the valuation
of the investment property portfolio is inherently subjective,
requiring significant judgement by the valuers. Errors in the
valuation could have a material impact on the Company’s net
asset value. Further information about the property portfolio
and inputs to the valuations are set out in note 9 to the
consolidated financial statements.
The Board and Audit and Risk Committee reviewed the
outcomes of the valuation process throughout the year and
discussed the detail of each of the quarterly valuations with
the Managers at Board Meetings. The Managers liaise with
the valuers on a regular basis and meet with them prior to
the production of each quarterly valuation. The Board was
represented at all of the quarterly valuation meetings with
CBRE Limited during the year, including the meeting in advance
of the production of the year end valuation. In addition, this is
a main area of audit focus and, accordingly, PwC attended the
year-end valuation meeting.
Income Recognition
Incomplete or inaccurate recognition could have an adverse
effect on the Group’s net asset value, earnings per share and
dividend cover.
The Board review the level of rent collection and arrears at the
quarterly Board meetings. An impairment provision has been
accrued in line with the accounting policy detailed in note 1(k).
The Committee reviewed in detail the reports and financial
statements and, having considered the report from its Manager,
assessed whether taken as a whole these documents
presented a fair, balanced and understandable view and
provided the information necessary for shareholders to assess
the Group’s performance, business model and strategy.
The 2022 Annual Report and Consolidated Financial
Statements was reviewed by the Financial Reporting Council’s
Corporate Reporting Review team and it has not entered into
substantive correspondence with the Group
(1)
. Pleasingly,
based on their review, there were no questions or queries that
they wished to raise. They noted two minor matters, where
they believed the users of the accounts would benefit from
improvements to our existing disclosures and these have been
incorporated in this year’s Annual Report.
Internal Controls and Risk Management
The Board is responsible for the Group’s system of internal
control and for reviewing its effectiveness. It has therefore
established a process designed to meet the particular needs
of the Group in managing the risks to which it is exposed,
consistent with the internal control guidance issued by the
Financial Reporting Council.
As part of this process, a matrix has been created that
identifies the Group’s key functions, including those carried
out by the Managers and other service providers, and the
individual activities undertaken within those functions. From
this, the Board has identified the Group’s principal risks and
the controls employed to manage those risks. The Audit and
Risk Committee reviews the risk matrix on a regular basis and
reports any issues to the Board.
The Board also monitors the investment performance of the
Group against its stated objective and comparable companies
and if necessary, approves changes to the guidelines. In
addition, the Board receives quarterly reports from the
Company Secretary in respect of compliance matters and
duties performed on behalf of the Company.
(1)
The FRC’s review was based solely on the annual report and accounts and the FRC did not benefit from detailed knowledge of the Group’s business or an
understanding of the underlying transactions entered into. It was, however, conducted by staff of the FRC who have an understanding of the relevant legal and
accounting framework. The letter provided no assurance that the annual report and accounts was correct in all material respects; the FRC’s role was not to verify the
information provided but to consider compliance with reporting requirements. The letter was written on the basis that the FRC (which includes its officers, employees
and agents) accepts no liability for reliance on it by the Group or any third party, including but not limited to investors and shareholders.
2023 Annual Report and Consolidated Financial Statements | 43
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Headlines and
Performance Summary
A formal annual review of these procedures is carried out
by the Audit and Risk Committee. The Committee has also
reviewed the Investment Managers’ and Property Managers’
Reports on “Internal Controls in accordance with ISAE
3402 and AAF (01/20)” for the period 1 November 2022 to
31
October 2023 and 1 November 2022 to 30 September
2023 respectively that has been prepared for their investment
company clients. Containing a report from independent external
accountants, the report sets out the Managers’ control
policies and procedures with respect to the management of
their clients’ investments. The effectiveness of these controls
is monitored by the Managers’ group audit committee which
receives regular reports from the Managers’ audit, risk and
compliance departments. Procedures are in place to capture
and evaluate failings and weaknesses and ensure that action
would be taken to remedy any significant issues identified from
this monitoring, which would be reported to the Board. No
significant failings or weaknesses in respect of the Company
were identified in the year under review nor to the date of this
report. The Depositary provides quarterly reports to the Board
and carries out daily independent checks on all cash and
investment transactions.
The review of procedures detailed above have been in place
throughout the year and up to the date of approval of the
Annual Report and the Audit and Risk Committee and the
Board is satisfied with their effectiveness. These procedures
are designed to manage rather than eliminate risk and, by
their nature, can only provide reasonable, but not absolute,
assurance against material misstatement or loss.
The Audit and Risk Committee has reviewed the need for
an internal audit function. The Group has no employees
and delegates all executive activities to third party service
providers, principally the Managers, Columbia Threadneedle,
and the Company Secretary, Northern Trust. It has decided that
the systems and procedures employed by the Managers and
the Company Secretary, including their internal audit functions
and the work carried out by the Company’s external auditor,
provide sufficient assurance that a sound system of internal
control, which safeguards the Company’s assets, is maintained.
An internal audit function specific to the Company is therefore
considered unnecessary.
External Audit
As part of its review of the scope and results of the audit,
during the year the Committee considered and approved PwC’s
plan for the audit of the financial statements for the year ended
31 December 2023. At the conclusion of the audit, PwC did not
highlight any issues which would cause it to qualify its audit
report but, as expected and in line with the Board’s comments,
it has drawn attention to the material uncertainty arising from
the Continuation Vote. PwC’s audit report is on pages 47 to 53.
There was no non-audit work carried out by PwC for the year
ended 31 December 2023.
As part of the review of auditor independence and
effectiveness, PwC have confirmed that they are independent of
the Group and have complied with relevant auditing standards.
In evaluating PwC, the Committee has taken into consideration
the standing, skills and experience of the firm and the audit
team. The Committee assesses the effectiveness of the audit
process through the reporting it receives from its Manager, its
interactions with PwC during the audit of the Annual Report and
Consolidated Financial Statements and considering the Review
of PwC UK by FRC’s Audit Quality Review. The Committee
is satisfied that PwC has provided effective independent
challenge in carrying out its responsibilities.
PwC have been auditor to the Group since the year ended
31 December 2016 following a tender process in November
2015. Lisa McClure was appointed as audit engagement
Partner in 2021 and the 2023 audit is her third year. The
Committee expects that it will in the normal course of events
conduct an audit tender in the second half of 2025.
Having assessed PwC’s performance in providing a robust
audit and its independence, the Committee recommends that
at the next Annual General Meeting PwC is reappointed as
auditor and that the Committee is authorised to determine
their remuneration.
Committee evaluation
The activities of the Audit and Risk Committee were considered
as part of the Board appraisal process completed in
accordance with standard governance arrangements as noted
on pages 37 to 40. A full evaluation was undertaken on the
effectiveness, roles and responsibilities of the Committee
in accordance with the Financial Reporting Council’s current
guidance. The evaluation found that the Committee functioned
well with the right balance of membership and skills. While
welcoming this feedback, the Committee agreed that it reviews
in particular the new guidance from the FRC to seek to ensure
that it would be in line with best practice in 2024. It will also
be considering later this year the revisions to the Corporate
Governance Code published in January 2024 and any related
statements from the Association of Investment Companies
and steps necessary to seek compliance with the new Code
effective from 1 January 2025.
Isobel Sharp
Chair of the Audit and Risk Committee
26
April 2024
44 | Balanced Commercial Property Trust Limited
Governance Report
Directors’ Remuneration Report
The Board comprises only non-executive Directors. The Company
has no executive Directors or employees. For these reasons, it
is not considered appropriate to have a separate Remuneration
Committee. The full Board determines the level of Directors’ fees.
Full details of the Company’s policy with regards to Directors’ fees,
and fees paid during the year ended 31 December 2023, are
shown below. No major decisions or substantial changes relating
to Directors’ remuneration were made during the year.
Directors’ Remuneration Policy
The Board considers the level of Directors’ fees at least
annually. Its policy is that the remuneration of the Directors
should reflect the experience of the Board as a whole, the
Directors’ responsibilities and skills, the time commitment
required, and be fair and comparable with that of other similar
companies. Furthermore, the level of remuneration should be
sufficient to attract and retain the Directors needed to oversee
the Company properly and to reflect its specific circumstances.
There were no changes to the policy during the year.
Having carefully considered the above, the Board have taken the
decision in light of pressures on returns for our sector not to
award any general increase in Directors’ fees for 2024, despite
the current level of inflation.
There is £30 million of Directors and Officers insurance in place.
The fees for the Directors are determined within the limit set
out in the Company’s Articles of Incorporation. The present
limit is an aggregate of £400,000 per annum and may not be
changed without seeking shareholder approval at a general
meeting. The fees are fixed and are payable, quarterly in
arrears. Directors are not eligible for bonuses, pension
benefits, long-term incentive schemes or other benefits.
It is the Board’s policy that Directors do not have service
contracts, but each new Director is provided with a letter
of appointment. The Directors’ letters of appointment are
available on request at the Company’s registered office during
business hours and will be available for 15 minutes prior to
and during the forthcoming Annual General Meeting.
The terms of Directors’ appointments provide that Directors should
be subject to election at the first Annual General Meeting after their
appointment. However, in accordance with the recommendations
of the UK Corporate Governance Code, the Board has agreed that
all Directors will retire annually and be subject to re-election at the
Annual General Meeting. There is no notice period and no provision
for compensation upon early termination of appointment.
The Board has not received any communications from the
Company’s Shareholders in respect of the levels of Directors’
remuneration.
Based on the current level of fees, Directors’ remuneration for
the forthcoming financial year will be as follows:
Annual fees for Board Responsibilities
2024
£
2023
£
Chairman £70,250 £70,250
Director £44,500 £44,500
Senior Independent Director
(1)
£52,750 £52,750
Audit and Risk Committee Chair
(2)
£52,750 £52,750
ESG Committee Chair
(3)
£49,500 £49,500
(1)
Director fee plus £8,250 as Senior Independent Director. The Audit and Risk
Committee Chair also became the Senior Independent Director with effect from
23 February 2024 and the fee for performing both roles in 2024 is £52,750.
(2)
Director fee plus £8,250 as Audit and Risk Committee Chair
(3)
Director fee plus £5,000 as ESG Committee Chair
Remuneration for the Year
The Directors who served during the year received the following emoluments as fees:
Fees for services to the Company
Fees Taxable Benefits
(1)
Total
2023
£
2022
£
2023
£
2022
£
2023
£
2022
£
P Marcuse 70,250 70,250 2,159 1,406 72,409 71,656
T Clark
(2)
22,003 52,750 2,191 3,764 24,194 56,514
J Wythe 44,500 44,500 3,200 1,988 47,700 46,488
L Wilding 49,500 44,500 3,937 2,346 53,437 46,846
H Scott-Barrett
(3)
52,750 52,750 2,637 1,405 55,387 54,155
I Sharp
(4)
49,295 6,584 543 – 49,838 6,584
Total 288,298 271,334 14,667 10,909 302,965 282,243
(1)
Comprises amounts reimbursed for expenses incurred in carrying out business for the Company, which have been grossed up to include PAYE and NI contributions.
(2)
Retired from Board and Chair of Audit and Risk Committee on 31 May 2023.
(3)
Retired on 23 February 2024.
(4)
Appointed to the Board on 8 November 2022. Appointed as Chair of the Audit and Risk Committee on 31 May 2023.
2023 Annual Report and Consolidated Financial Statements | 45
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Notice of AGM Other InformationStrategic Report
Financial Report
Headlines and
Performance Summary
The table below sets out the percentage change in annual fees
for each Director who served in the year under review (where
Directors have served for a full year and therefore fees can be
compared on a like-for-like basis).
Annual percentage change in fees
2023
%
2022
%
2021
%
2020
%
P Marcuse
(1)
– +19.3 +18.9 +7.8%
T Clark
(2)
n/a +6.6 – –
J Wythe – +7.9 – –
L Wilding
(3)
+11.2 +7.9 – n/a
H Scott-Barrett
(4)
– +15.5 n/a n/a
I Sharp
(5)
n/a n/a n/a n/a
(1)
Appointed as Chairman from 17 June 2021.
(2)
Retired from Board and Chair of Audit and Risk Committee on 31 May 2023.
(3)
Appointed to the Board on 3 June 2019. Fee increase in 2023 due to being
Chair of ESG Committee.
(4)
Appointed to the Board from 4 January 2021 and appointed as Senior
Independent Director from 17 June 2021.
(5)
Appointed to the Board on 8 November 2022 and appointed as Chair of Audit
and Risk Committee on 31 May 2023.
The table below shows the actual expenditure during the year in
relation to Directors’ remuneration (excluding taxable benefits),
other expenses and shareholder distributions:
Relative importance of pay
Actual Expenditure Year
ended 31 December
2023
£
2022
£
%
Change
Aggregate Directors’ fees 288,298 271,334 +6.3
Management and other
expenses
(1)
13,304,000 13,340,000 -0.3
Dividends paid to
shareholders 34,516,000 33,891,000 +1.8
(1)
Includes Directors’ remuneration
Directors’ Shareholdings
The Directors who held office at the year-end and their interests (all
beneficial) in the Ordinary Shares of the Company were as follows:
Directors’ share interests
2023 2022
T Clark
(1)
n/a 56,200
P Marcuse 49,463 49,463
J Wythe 33,466 33,466
L Wilding 40,000 40,000
H Scott-Barrett
(2)
100,000 100,000
I Sharp 55,000 55,000
(1)
T Clark retired 31 May 2023.
(2)
H Scott-Barrett retired on 23 February 2024.
(3)
K Fahmy was appointed post year-end on 19 January 2024.
The Board has a policy on Directors owning shares in the
Company. It is deemed appropriate for all Directors to acquire
shares in the Company. The policy states that an appropriate
minimum holding should be equivalent in value to one year’s
directors’ fees at the date the shares are purchased. Directors
should aim to acquire their shareholding within 18 months of
the date of their appointment.
Karima Fahmy was appointed to the Board on 19 January 2024
and currently holds no shares in the Company but is aware of
the policy mentioned above. The appointment process used an
independent recruitment consultant Fletcher Jones, who have no
connection with the Company or any Director, for this appointment.
The Nomination Committee interviewed a number of potential
candidates after producing a short list from an extensive long list,
provided by the consultant. There have been no other changes in
the above interests since 31 December 2023.
Company Performance
The Board is responsible for the Company’s investment strategy
and performance, although the management of the Company’s
investment portfolio is delegated to the Managers through the
investment management agreement, as referred to on page 34.
A comparison of the Company’s performance over the five
year period is set out in the graph below. This shows the total
return (assuming all dividends are reinvested) to ordinary
shareholders against the MSCI UK Quarterly Property Index.
Shareholder total return vs MSCI UK Quarterly Index over five
years (rebased to 100 at 31 December 2018) %
MSCI UK Quarterly Property Index – total return
Balanced Commercial Property Trust share price total return
Index
60
70
80
90
100
110
120
202320222021202020192018
Voting at Annual General Meeting
At the Company’s last Annual General Meeting, held on 31 May
2023, shareholders approved the Directors’ Remuneration
Report as set out in the Annual Report in respect of the year
ended 31 December 2022. 98.1 per cent of votes were in
favour of the resolution and 1.9 per cent were against.
An ordinary resolution for the approval of Directors’ Remuneration
Report will be put to shareholders at the forthcoming Annual
General Meeting.
The Directors Remuneration Policy is approved by shareholders
every three years and was last approved by shareholders at the
AGM in 2023 where 98.1
per cent of votes were in favour and
1.9 per cent were against.
On behalf of the Board
Paul Marcuse
Chairman
26
April 2024
46 | Balanced Commercial Property Trust Limited
Governance Report
The Directors are responsible for preparing the Annual Report
and Consolidated Financial Statements in accordance with
applicable law and regulations. They are also responsible for
ensuring that the Annual Report includes information required
by the Listing Rules and Disclosure Guidance and Transparency
Rules of the UK Listing Authority.
Guernsey company law requires the Directors to prepare
financial statements for each financial year. Under that law they
have elected to prepare the financial statements in accordance
with International Financial Reporting Standards as adopted by
the EU and applicable law.
The financial statements are required by law to give a true and
fair view of the state of affairs of the Group and of the profit or
loss of the Group for that period.
In preparing these financial statements, the Directors are
required to:
• select suitable accounting policies and then apply them
consistently;
• make judgements and accounting estimates that are
reasonable and prudent;
• state whether applicable accounting standards have been
followed, subject to any material departures disclosed and
explained in the financial statements; and
• prepare the financial statements on the going concern
basis unless it is inappropriate to presume that the Group
will continue in business.
The Directors confirm that they have complied with the above
requirements in preparing the financial statements.
The Directors are responsible for keeping adequate accounting
records that are sufficient to show and explain the Group’s
transactions and disclose with reasonable accuracy at any time
the financial position of the Group and enable them to ensure
that the financial statements and the Directors’ Remuneration
Report comply with the Companies (Guernsey) Law, 2008.
They have a general responsibility for taking such steps as
reasonably open to them to safeguard the assets of the Group
and to prevent and detect fraud and other irregularities.
The Directors are also responsible for ensuring that the Group
complies with the Listing Rules and the Disclosure Guidance
and Transparency Rules of the UK Listing Authority which, with
regard to Corporate governance, requires the Group to disclose
how it applied the principles and complied with the provisions
of the UK Corporate Governance Code applicable to the Group.
The Directors are responsible for the integrity of the corporate
and financial information included on the Company’s website,
which is maintained by the Managers’. Legislation in Guernsey
governing the preparation and dissemination of financial
statements may differ from legislation in other jurisdictions.
Statement under Disclosures Guidance and
Transparency Rule 4.1.12
Each of the Directors listed on page 32 confirms to the best of
their knowledge that:
• the financial statements, prepared in accordance with
International Financial Reporting Standards as adopted by
the EU, give a true and fair view of the assets, liabilities,
financial position and profit or loss of the Group and the
undertakings included in the consolidation taken as a whole
and comply with The Companies (Guernsey) Law, 2008; and
• the Strategic Report (comprising the Chairman’s Statement;
Business Model and Strategy, Promoting the Success of the
Company; Key Performance Indicators; Principal Risks and
Future Prospects; Managers’ Review; Property Portfolio and
Environmental, Social and Governance) and the Directors’
Report include a fair review of the development and
performance of the business and the position of the Group
and the undertakings included in the consolidation taken
as a whole, together with a description of the principal risks
and uncertainties that they face; and
• the consolidated financial statements and Directors’ Report
include details of related party transactions; and
• the Annual Report and consolidated financial statements,
taken as a whole, are fair, balanced and understandable
and provide the information necessary for shareholders to
assess the Group’s position and performance, business
model and strategy.
On behalf of the Board
Paul Marcuse
Chairman
26
April 2024
Statement of Directors’ Responsibilities
2023 Annual Report and Consolidated Financial Statements | 47
Auditor’s Report
Governance Report Auditor's Report
Notice of AGM Other InformationStrategic Report
Financial Report
Headlines and
Performance Summary
Report on the audit of the consolidated financial statements
Our opinion
In our opinion, the financial statements give a true and fair view of the consolidated financial position of Balanced Commercial
Property Trust Limited (the “company”) and its subsidiaries (together “the group”) as at 31 December 2023, and of its
consolidated financial performance and their consolidated cash flows for the year then ended in accordance with International
Financial Reporting Standards as adopted by the European Union and have been properly prepared in accordance with the
requirements of The Companies (Guernsey) Law, 2008.
What we have audited
The group’s consolidated financial statements comprise:
• the consolidated balance sheet as at 31 December 2023;
• the consolidated statement of comprehensive income for the year then ended;
• the consolidated statement of changes in equity for the year then ended;
• the consolidated statement of cash flows for the year then ended; and
• the notes to the consolidated financial statements, comprising material accounting policy information and other explanatory
information.
Basis for opinion
We conducted our audit in accordance with International Standards on Auditing (“ISAs”). Our responsibilities under those
standards are further described in the
Auditor’s responsibilities for the audit of the consolidated financial statements
section of
our report.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.
Independence
We are independent of the group in accordance with the ethical requirements that are relevant to our audit of the consolidated
financial statements of the group, as required by the Crown Dependencies’ Audit Rules and Guidance. We have fulfilled our other
ethical responsibilities in accordance with these requirements. We are also independent in accordance with SEC Independence Rules.
Material Uncertainty Related to Going Concern
We draw attention to note 1(a)(iv) to the consolidated financial statements, which indicates that a Continuation Vote is due to be
held during 2024. If the Continuation Vote is not passed by shareholders then the Board will be required to bring proposals to
shareholders that may include a restructuring or wind down of the company in its current form. As stated in note 1(a)(iv) these events
or conditions along with other matters set forth in note 1(a)(iv), indicate that a material uncertainty exists that may cast significant
doubt on the group’s ability to continue as a going concern. Our opinion is not modified in respect of this matter.
Independent Auditor’s Report to the Members
of Balanced Commercial Property Trust Limited
48 | Balanced Commercial Property Trust Limited
Auditor’s Report
Our audit approach
Overview
Audit scope
• The group audit scoping was performed based on total assets held within each of the eight components, all of which are wholly
owned Guernsey domiciled companies. Our audit covers the consolidated financial statements of the group.
• We conducted our audit work in Guernsey and virtually with teams based in Jersey.
• We conducted our audit of the consolidated financial statements based on information provided by the appointed service
providers to the group to whom the board of directors has delegated the provision of certain functions, including Columbia
Threadneedle Investment Business Limited (the “Investment Manager”), Columbia Threadneedle REP Asset Management plc
(the “Property Manager”) and CBRE Limited (the “Property Valuer”).
Key audit matters
• Valuation of Investment Properties as at 31 December 2023.
• Revenue recognition.
• Material uncertainty relating to going concern
Materiality
• Overall group materiality: £10.8 million (2022: £11.6 million) based on 1% of group total assets.
• Performance materiality: £8.1 million (2022: £8.7 million).
The scope of our audit
As part of designing our audit, we determined materiality and assessed the risks of material misstatement in the consolidated
financial statements. In particular, we considered where the directors made subjective judgements; for example, in respect of
significant accounting estimates that involved making assumptions and considering future events that are inherently uncertain.
As in all of our audits, we also addressed the risk of management override of internal controls, including among other matters,
consideration of whether there was evidence of bias that represented a risk of material misstatement due to fraud.
Key audit matters
Key audit matters are those matters that, in the auditor’s professional judgement, were of most significance in the audit of the
consolidated financial statements of the current period and include the most significant assessed risks of material misstatement
(whether or not due to fraud) identified by the auditor, including those which had the greatest effect on: the overall audit strategy;
the allocation of resources in the audit; and directing the efforts of the engagement team. These matters, and any comments
we make on the results of our procedures thereon, were addressed in the context of our audit of the consolidated financial
statements as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters. In addition
to the matter described in the Material uncertainty related to going concern, we have determined the matters described below to
be the key audit matters to be communicated in our report.
This is not a complete list of all risks identified by our audit.
2023 Annual Report and Consolidated Financial Statements | 49
Auditor’s Report
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Performance Summary
Key audit matter How our audit addressed the key audit matter
Valuation of Investment Properties as at 31 December 2023
Please refer to note 1(f) and 9 to the consolidated financial
statements.
The group’s investment properties represent the majority of the
group’s assets as at 31 December 2023.
The valuation of the group’s investment properties is inherently
subjective due to, among other factors, the individual nature
of each property, its location and the expected future rental
income for that particular property.
The existence of significant estimation uncertainty, coupled
with the fact that only a small percentage difference in
individual property valuation assumptions, when aggregated,
could result in a material misstatement, is why we have given
specific audit focus and attention to this area.
The valuation of the group’s investment properties was carried
out by the Property Valuer. The Property Valuer was engaged by
the Investment Manager on behalf of the group and performed
its work in accordance with the latest version of the RICS
Valuation – Global Professional Standards (known as the “Red
Book”) current as at the valuation date.
In determining a property’s valuation, the Property Valuer takes
into account property specific current information such as
the current tenancy agreements and rental income earned by
the property. The Property Valuer then applies assumptions
in relation to capitalisation rates and current market rent and
growth, based on available market data and transactions,
to arrive at a range of valuation outcomes, from which they
derive a point estimate. Due to the unique nature of each
property, the assumptions applied take into consideration
the individual property characteristics at a tenant level,
as well as the qualities of the property as a whole. Where
available, comparable market information is also used in
the assessment of the valuation of the group’s investment
properties.
The group has adopted the assessed values determined by the
Property Valuer, adjusted for lease incentives.
This is a main area of focus and a significant risk. Due to its
significance and importance to the users of the consolidated
financial statements, we have determined this area to be a key
audit matter.
Understanding
We have updated our understanding and evaluated the internal
controls relating to the valuation of investment properties.
Objectivity and experience of the Property Valuer
We assessed the Property Valuer’s independence,
qualifications and expertise and read their terms of
engagement with the group to determine whether there were
any matters that might have affected their objectivity or may
have imposed scope limitations upon their work.
External Valuation Report
We read the valuation reports and discussed the reports
with the Property Valuer and understood that the valuation
approach for each property was in accordance with
professional valuation standards and suitable for use in
determining the fair value of investment properties as at
31 December 2023.
We considered the adequacy of the disclosures made in
the notes to the consolidated financial statements (critical
judgements and estimates and investment properties). These
notes explain that there is significant estimation uncertainty in
relation to the valuation of investment properties included in
the consolidated balance sheet as at 31 December 2023.
We inspected the property specific information supplied to the
Property Valuer by the group, and on a sample basis, agreed
the factual inputs to underlying property records held by the
group.
Assumptions
Our work over the assumptions encompassed all properties in
the portfolio. We engaged our own auditor’s valuation expert
to critique and challenge the work performed and assumptions
used by the Property Valuer. In particular, we compared the
valuation metrics used by the Property Valuer to recent
market activity. We also challenged both management and the
Property Valuer on significant movements in the valuations.
Due to the subjectivity involved in determining valuations
for individual properties and the existence of alternative
assumptions and valuation methods, we determined a range
of values that were considered reasonable to evaluate the
independent property valuations used by management and
also assessed for any contradictory information.
We have not identified any material matters to report to those
charged with governance.
50 | Balanced Commercial Property Trust Limited
Auditor’s Report
Key audit matter How our audit addressed the key audit matter
Revenue Recognition
Revenue for the group consists primarily of rental income.
The revenue recognition policy is stated in note 1(c) to the
consolidated financial statements.
Rental income is based on tenancy agreements where there
is a standard process in place for recording revenue. The
majority of the group’s revenue is collected and managed by
the Property Managers.
In addition to the standard process for recording rental
income, the group manually calculates the spreading of lease
incentives to ensure revenue is recorded on a straight-line
basis over the course of the lease.
Due to the importance of rental income to the group’s ability
to continue to pay interim dividends, and therefore the
significance of this balance to the users of the consolidated
financial statements, we have deemed this area to be a key
audit matter.
We have reconciled the rental tenancy schedule to the
schedule of investment properties owned by the group and
the rent recognised in the underlying financial records. We
have also performed digitally enabled procedures to match
the rental journals posted to the cash ledger directly to the
amounts in the bank statements.
We have tested a sample of rental income per the accounting
records to signed lease agreements and rent review
agreements.
We have also recalculated a sample of lease incentives to
management’s calculation and that the lease incentive has
been appropriately recognised on a straight-line basis over the
appropriate lease term.
We have not identified any material matters to report to those
charged with governance.
How we tailored the audit scope
We tailored the scope of our audit to ensure that we performed enough work to be able to give an opinion on the consolidated
financial statements as a whole, taking into account the structure of the group, the accounting processes and controls, the
industry in which the group operates, and we considered the risk of climate change and the potential impact thereof on our audit
approach.
Materiality
The scope of our audit was influenced by our application of materiality. We set certain quantitative thresholds for materiality.
These, together with qualitative considerations, helped us to determine the scope of our audit and the nature, timing and
extent of our audit procedures on the individual financial statement line items and disclosures and in evaluating the effect of
misstatements, both individually and in aggregate on the consolidated financial statements as a whole.
Based on our professional judgement, we determined materiality for the consolidated financial statements as a whole as follows:
Overall group materiality £10.8 million (2022: £11.6 million).
How we determined it 1% of group total assets
Rationale for benchmark applied We believe that total assets is the primary measure used by the shareholders
in assessing the performance of the group. We did not apply a separate specific
materiality to the consolidated statement of comprehensive income. We believe
our overall materiality was of a level sufficient to address the risk of material
misstatement in the consolidated statement of comprehensive income.
We use performance materiality to reduce to an appropriately low level the probability that the aggregate of uncorrected and
undetected misstatements exceeds overall materiality. Specifically, we use performance materiality in determining the scope of
our audit and the nature and extent of our testing of account balances, classes of transactions and disclosures, for example in
determining sample sizes. Our performance materiality was 75% (2022: 75%) of overall materiality, amounting to £8.1 million
(2022: £8.7 million) for the group financial statements.
In determining the performance materiality, we considered a number of factors – the history of misstatements, risk assessment
and aggregation risk and the effectiveness of controls - and concluded that an amount at the upper end of our normal range was
appropriate.
We agreed with the Audit and Risk Committee that we would report to them misstatements identified during our audit above £538k
(2022: £582k) as well as misstatements below that amount that, in our view, warranted reporting for qualitative reasons.
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Reporting on other information
The other information comprises all the information included in the Annual Report and Consolidated Financial Statements (the
“Annual Report”) but does not include the consolidated financial statements and our auditor’s report thereon. The directors are
responsible for the other information.
Our opinion on the consolidated financial statements does not cover the other information and we do not express any form of
assurance conclusion thereon.
In connection with our audit of the consolidated financial statements, our responsibility is to read the other information and, in
doing so, consider whether the other information is materially inconsistent with the consolidated financial statements or our
knowledge obtained in the audit, or otherwise appears to be materially misstated. If, based on the work we have performed, we
conclude that there is a material misstatement of this other information, we are required to report that fact. We have nothing to
report based on these responsibilities.
Responsibilities for the consolidated financial statements and the audit
Responsibilities of the directors for the consolidated financial statements
As explained more fully in the Statement of Directors’ Responsibilities, the directors are responsible for the preparation of the
consolidated financial statements that give a true and fair view in accordance with International Financial Reporting Standards
as adopted by the European Union, the requirements of Guernsey law and for such internal control as the directors determine is
necessary to enable the preparation of consolidated financial statements that are free from material misstatement, whether due
to fraud or error.
In preparing the consolidated financial statements, the directors are responsible for assessing the group’s ability to continue as a
going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless
the directors either intend to liquidate the group or to cease operations, or have no realistic alternative but to do so.
Auditor’s responsibilities for the audit of the consolidated financial statements
Our objectives are to obtain reasonable assurance about whether the consolidated financial statements as a whole are free from
material misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our opinion. Reasonable
assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with ISAs will always detect
a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually
or in aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these
consolidated financial statements.
Our audit testing might include testing complete populations of certain transactions and balances, possibly using data auditing
techniques. However, it typically involves selecting a limited number of items for testing, rather than testing complete populations.
We will often seek to target particular items for testing based on their size or risk characteristics. In other cases, we will use audit
sampling to enable us to draw a conclusion about the population from which the sample is selected.
As part of an audit in accordance with ISAs, we exercise professional judgement and maintain professional scepticism throughout
the audit. We also:
• Identify and assess the risks of material misstatement of the consolidated financial statements, whether due to fraud or error,
design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate
to provide a basis for our opinion. The risk of not detecting a material misstatement resulting from fraud is higher than for
one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of
internal control.
• Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the
circumstances, but not for the purpose of expressing an opinion on the effectiveness of the group’s internal control.
• Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related
disclosures made by the directors.
52 | Balanced Commercial Property Trust Limited
Auditor’s Report
• Conclude on the appropriateness of the directors’ use of the going concern basis of accounting and, based on the audit
evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on
the group’s ability to continue as a going concern over a period of at least twelve months from the date of approval of the
consolidated financial statements. If we conclude that a material uncertainty exists, we are required to draw attention in our
auditor’s report to the related disclosures in the consolidated financial statements or, if such disclosures are inadequate, to
modify our opinion. Our conclusions are based on the audit evidence obtained up to the date of our auditor’s report. However,
future events or conditions may cause the group to cease to continue as a going concern.
• Evaluate the overall presentation, structure and content of the consolidated financial statements, including the disclosures,
and whether the consolidated financial statements represent the underlying transactions and events in a manner that achieves
fair presentation.
• Obtain sufficient appropriate audit evidence regarding the financial information of the entities or business activities within the
group to express an opinion on the consolidated financial statements. We are responsible for the direction, supervision and
performance of the group audit. We remain solely responsible for our audit opinion.
We communicate with those charged with governance regarding, among other matters, the planned scope and timing of the audit
and significant audit findings, including any significant deficiencies in internal control that we identify during our audit.
We also provide those charged with governance with a statement that we have complied with relevant ethical requirements
regarding independence, and to communicate with them all relationships and other matters that may reasonably be thought to
bear on our independence, and where applicable, related safeguards.
From the matters communicated with those charged with governance, we determine those matters that were of most significance
in the audit of the consolidated financial statements of the current period and are therefore the key audit matters. We describe
these matters in our auditor’s report unless law or regulation precludes public disclosure about the matter or when, in extremely
rare circumstances, we determine that a matter should not be communicated in our report because the adverse consequences of
doing so would reasonably be expected to outweigh the public interest benefits of such communication.
Use of this report
This report, including the opinions, has been prepared for and only for the members as a body in accordance with Section
262 of The Companies (Guernsey) Law, 2008 and for no other purpose. We do not, in giving these opinions, accept or assume
responsibility for any other purpose or to any other person to whom this report is shown or into whose hands it may come save
where expressly agreed by our prior consent in writing.
Report on other legal and regulatory requirements
Company Law exception reporting
Under The Companies (Guernsey) Law, 2008 we are required to report to you if, in our opinion:
• we have not received all the information and explanations we require for our audit;
• proper accounting records have not been kept; or
• the consolidated financial statements are not in agreement with the accounting records.
We have no exceptions to report arising from this responsibility.
Corporate governance statement
The Listing Rules require us to review the directors’ statements in relation to going concern, longer-term viability and that part of
the corporate governance statement relating to the company’s compliance with the provisions of the UK Corporate Governance
Code specified for our review. Our additional responsibilities with respect to the corporate governance statement as other
information are described in the Reporting on other information section of this report.
The company has reported compliance against the 2019 AIC Code of Corporate Governance (the “Code”) which has been
endorsed by the UK Financial Reporting Council as being consistent with the UK Corporate Governance Code for the purposes of
meeting the company’s obligations, as an investment company, under the Listing Rules of the FCA.
2023 Annual Report and Consolidated Financial Statements | 53
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Performance Summary
Based on the work undertaken as part of our audit, we have concluded that each of the following elements of the corporate
governance statement, included within the Strategic Report section of the Annual Report is materially consistent with the
consolidated financial statements and our knowledge obtained during the audit, and we have nothing material to add or draw
attention to in relation to:
• The directors’ confirmation that they have carried out a robust assessment of the emerging and principal risks;
• The disclosures in the Annual Report that describe those principal risks, what procedures are in place to identify emerging
risks and an explanation of how these are being managed or mitigated;
• The directors’ statement in the consolidated financial statements about whether they considered it appropriate to adopt the
going concern basis of accounting in preparing them, and their identification of any material uncertainties to the group’s ability
to continue to do so over a period of at least twelve months from the date of approval of the consolidated financial statements;
• The directors’ explanation as to their assessment of the group’s prospects, the period this assessment covers and why the
period is appropriate; and
• The directors’ statement as to whether they have a reasonable expectation that the company will be able to continue in
operation and meet its liabilities as they fall due over the period of its assessment, including any related disclosures drawing
attention to any necessary qualifications or assumptions.
Our review of the directors’ statement regarding the longer-term viability of the group was substantially less in scope than an
audit and only consisted of making inquiries and considering the directors’ process supporting their statements; checking that
the statements are in alignment with the relevant provisions of the Code; and considering whether the statement is consistent
with the consolidated financial statements and our knowledge and understanding of the group and its environment obtained in the
course of the audit.
In addition, based on the work undertaken as part of our audit, we have concluded that each of the following elements of the
corporate governance statement is materially consistent with the consolidated financial statements and our knowledge obtained
during the audit:
• The directors’ statement that they consider the Annual Report, taken as a whole, is fair, balanced and understandable, and
provides the information necessary for the members to assess the group’s position, performance, business model and strategy;
• The section of the Annual Report that describes the review of effectiveness of risk management and internal control systems; and
• The section of the Annual Report describing the work of the Audit and Risk Committee.
We have nothing to report in respect of our responsibility to report when the directors’ statement relating to the company’s
compliance with the Code does not properly disclose a departure from a relevant provision of the Code specified under the Listing
Rules for review by the auditors.
Other matter
In due course, as required by the Financial Conduct Authority Disclosure Guidance and Transparency Rule 4.1.14R, these
consolidated financial statements will form part of the ESEF-prepared annual financial report filed on the National Storage
Mechanism of the Financial Conduct Authority in accordance with the ESEF Regulatory Technical Standard (“ESEF RTS”). This
auditor’s report provides no assurance over whether the annual financial report will be prepared using the single electronic format
specified in the ESEF RTS.
Lisa McClure
For and on behalf of PricewaterhouseCoopers CI LLP
Chartered Accountants Recognised Auditor
Guernsey, Channel Islands
26 April 2024
a. The maintenance and integrity of the Balanced Commercial Property Trust Limited website is the responsibility of the directors; the work carried out by the auditors
does not involve consideration of these matters and, accordingly, the auditors accept no responsibility for any changes that may have occurred to the financial
statements since they were initially presented on the website.
b. Legislation in Guernsey governing the preparation and dissemination of financial statements may differ from legislation in other jurisdictions.
54 | Balanced Commercial Property Trust Limited
Financial Report
Notes
| 2023 | 2022 | |
| £’000 | £’000 | |
| Revenue | ||
Rental income | ||
2 Other income | ||
Total revenue | ||
| Losses on investments properties | ||
9 Unrealised losses on revaluation of investment properties | ( | ( |
9 Losses on sale of investment properties realised | ( | ( |
Total loss | ( | ( |
| Expenditure | ||
3 Investment management fee | ( | ( |
4 Other expenses | ( | ( |
Total expenditure | ( | ( |
Operating loss before finance costs and taxation | ( | ( |
| Net finance costs | ||
Interest income | ||
5 Finance costs | ( | ( |
( | ( | |
Loss before taxation | ( | ( |
6 Taxation | ( | ( |
Loss for the year | ( | ( |
| Other comprehensive income | ||
| Items that are or may be reclassified subsequently to profit or loss | ||
Movement in fair value of effective interest rate swap | ( | |
Total comprehensive loss for the year | ( | ( |
7 Basic and diluted earnings per share | ( | ( |
EPRA earnings per share |
All of the profit and total comprehensive income or losses for the year is attributable to the owners of the Group.
All items in the above statement derive from continuing operations.
Consolidated Statement of
Comprehensive Income
For the year ended 31December
The accompanying notes on pages 58 to 80 are an integral part of the above statement.
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Notes
| 2023 | 2022 | |
| £’000 | £’000 | |
| Non-current assets | ||
9 Investment properties | ||
10 Trade and other receivables | ||
| Current assets | ||
9 Investment properties held for sale | ||
10 Trade and other receivables | ||
13 Interest rate swap asset | ||
11 Cash and cash equivalents | ||
Total assets | ||
| Current liabilities | ||
12 Trade and other payables | ( | ( |
13 Interest-bearing loan | ( | ( |
( | ( | |
| Non-current liabilities | ||
12 Trade and other payables | ( | ( |
13 Interest-bearing loan | ( | ( |
( | ( | |
Total liabilities | ( | ( |
Net assets | ||
| Represented by: | ||
14 Share capital | ||
Special reserve | ||
Capital reserve – investments sold | ||
Capital reserve – investments held | ||
Hedging reserve | ||
Revenue reserve | ||
Equity shareholders’ funds | ||
15 Net asset value per share | ||
EPRA net tangible assets per share |
Consolidated
Balance Sheet
As at 31December
The accompanying notes on pages 58 to 80 are an integral part of the above statement.
56 | Balanced Commercial Property Trust Limited
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The accompanying notes on pages 58 to 80 are an integral part of the above statement.
For the year ended 31 December 2023
Notes
| Capital | Capital | |||||||
| Reserve – | Reserve – | |||||||
| Share | Special | Investments | Investments | Hedging | Revenue | |||
| Capital | Reserve | Sold | Held | Reserve | Reserve | Total | ||
| £’000 | £’000 | £’000 | £’000 | £’000 | £’000 | £’000 | ||
At 1 January 2023 | ||||||||
| Total comprehensive income for the year | ||||||||
Loss for the year | ( | ( | ||||||
| 9 | Transfer of prior years’ revaluation to | |||||||
realised reserve | ( | |||||||
| 9 | Transfer in respect of unrealised losses on | |||||||
investment properties | ( | |||||||
| 9 | Losses on sale of investment | |||||||
properties realised | ( | |||||||
Movement in fair value of interest rate swap | ( | ( | ||||||
| 5 | Transfer of loss on maturity of interest | |||||||
rate swap | ( | |||||||
Total comprehensive income for the year | ( | ( | ( | ( | ||||
| Transactions with owners of the Company | ||||||||
| recognised directly in equity | ||||||||
| 8 | Dividends paid | ( | ( | |||||
At 31 December 2023 |
For the year ended 31 December 2022
Notes
| Capital | Capital | |||||||
| Reserve – | Reserve – | |||||||
| Share | Special | Investments | Investments | Hedging | Revenue | |||
| Capital | Reserve | Sold | Held | Reserve | Reserve | Total | ||
| £’000 | £’000 | £’000 | £’000 | £’000 | £’000 | £’000 | ||
At 1 January 2022 | ||||||||
| Total comprehensive income for the year | ||||||||
Loss for the year | ( | ( | ||||||
Movement in fair value of interest rate swap | ||||||||
| 9 | Transfer in respect of unrealised losses on | |||||||
investment properties | ( | |||||||
| 9 | Losses on sale of investment | |||||||
properties realised | ( | |||||||
Total comprehensive income for the year | ( | ( | ( | |||||
| Transactions with owners of the Company | ||||||||
| recognised directly in equity | ||||||||
| Transfer from share capital to | ||||||||
special reserve | ( | |||||||
| 14 | Buybacks to Treasury | ( | ( | |||||
| 8 | Dividends paid | ( | ( | |||||
At 31 December 2022 |
Consolidated Statement of
Changes in Equity
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Notes
| 2023 | 2022 | ||
| £’000 | £’000 | ||
| Cash flows from operating activities | |||
Loss before taxation | ( | ( | |
| Adjustments for: | |||
5 | Finance costs | ||
Interest income | ( | ( | |
9 | Unrealised losses on revaluation of investment properties | ||
9 | Losses on sale of investment properties realised | ||
Decrease/(increase) in operating trade and other receivables | ( | ||
(Decrease)/increase in operating trade and other payables | ( | ||
Cash generated from operations | |||
Interest received | |||
Interest and bank fees paid | ( | ( | |
Taxation paid | ( | ( | |
( | ( | ||
Net cash inflow from operating activities | |||
| Cash flows from investing activities | |||
Purchase of investment properties | ( | ( | |
9 | Sale of investment properties | ||
Capital expenditure on investment properties | ( | ( | |
Net cash inflow/(outflow) from investing activities | ( | ||
| Cash flows from financing activities | |||
8 | Dividends paid | ( | ( |
13 | Issue costs for loan facility extension and Barclays/HSBC loan agreement | ( | ( |
13 | Repayment of Barclays loan | ( | |
13 | Drawdown of Barclays/HSBC loan | ||
14 | Buybacks to Treasury | ( | |
Net cash outflow from financing activities | ( | ( | |
Net decrease in cash and cash equivalents | ( | ( | |
Cash and cash equivalents at the beginning of the year | |||
11 | Cash and cash equivalents at the end of the year |
Consolidated Statement of
Cash Flows
For the year ended 31December
The accompanying notes on pages 58 to 80 are an integral part of the above statement.
58 | Balanced Commercial Property Trust Limited
Financial Report
Notes to the Consolidated
Financial Statements
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1. Material accounting policy information (continued)
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1. Material accounting policy information (continued)
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1. Material accounting policy information (continued)
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1. Material accounting policy information (continued)
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1. Material accounting policy information (continued)
64 | Balanced Commercial Property Trust Limited
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1. Material accounting policy information (continued)
3. Investment Management fee
| 2023 | 2022 | |
| £’000 | £’000 | |
Base management fee | 5,968 | 6,861 |
Throughout the year the Group’s investment manager was Columbia Threadneedle Investment Business Limited. The property
management arrangements of the Group have been delegated by Columbia Threadneedle Investment Business Limited, with the
approval of the Company, to Columbia Threadneedle REP AM plc.
Columbia Threadneedle Investment Business Limited is entitled to a base management fee of 0.55 per cent per annum of the
Group’s gross assets including cash held provided that no fee is payable on any cash held in excess of 5 per cent of the net
assets of the Group (reduced to 0.525 per cent per annum on gross assets between £1.5 billion and £2 billion and 0.5 per
cent per annum on gross assets in excess of £2 billion). Columbia Threadneedle Investment Business Limited is not entitled to
a performance fee. £61,000 (2022: £81,000) was deducted from the management fees during the year relating to a rebate of
insurance commission earned by the Managers.
The investment management agreement may be terminated by either party by giving not less than six months’ notice. The
agreement may be terminated earlier by the Company provided that a payment in lieu of notice, equivalent to the amount that the
investment manager would otherwise have received during the notice period, is made.
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Financial Report
| 2023 | 2022 | |
| £’000 | £’000 | |
Direct operating expenses of let rental property | 2,167 | 3,546 |
Direct operating expenses of vacant property | 2,561 | 1,709 |
Impairment provision | 538 | (478) |
Valuation and other professional fees | 593 | 438 |
Directors’ fees | 288 | 271 |
Administration fee | 191 | 161 |
Depositary fee | 82 | 160 |
Auditor’s remuneration | 176 | 161 |
Other | 740 | 511 |
7,336 | 6,479 |
| 2023 | 2022 | |
| £’000 | £’000 | |
Interest on the L&G loan | 8,632 | 8,632 |
Facility agent/monitoring fee | 262 | 272 |
Interest on the £320m Barclays/HSBC loan | 1,045 | – |
Interest on the repaid £100m Barclays loan | 2,562 | 1,976 |
Net interest in respect of the interest rate swap agreement | (1,191) | (406) |
Amortisation of loan set up costs | 953 | 642 |
Loss on maturity of interest rate swap | 187 | – |
Set-up costs written-off on the repaid £100m Barclays Loan | 167 | – |
12,617 | 11,116 |
66 | Balanced Commercial Property Trust Limited
Financial Report
6. Taxation
| 2023 | 2022 | |
| £’000 | £’000 | |
| Current tax | ||
Corporation tax charge in respect to distributions to holders of excessive rights | 71 | 345 |
Total tax charge | 71 | 345 |
The corporation tax charge for the year ended 31 December 2023 relates to an underpayment from a previous year.
A reconciliation of the tax charge applicable to the results at the statutory tax rate to the charge for the year is as follows:
| 2023 | 2022 | |
| £’000 | £’000 | |
Loss before taxation | (25,996) | (94,032) |
UK tax at a rate of 23.5 per cent (2022: 19 per cent) | (6,109) | (17,866) |
| Effects of: | ||
Capital losses on investment properties not taxable | 14,446 | 24,529 |
UK REIT exemption on net income | (8,337) | (6,663) |
Corporation tax charge in respect to distributions to holders of excessive rights | 71 | 345 |
Total tax charge | 71 | 345 |
The tax rate effective for the year ended 31 December 2023 is 23.5 per cent which is the blended rate of tax - profits up to
31 March 2023 are subject to 19 per cent whilst profits for the nine months to 31 December 2023 are subject to 25 per cent. The
Company and its subsidiaries are exempt from Guernsey taxation under the Income Tax (Exempt Bodies) (Guernsey) Ordinance,
1989. No charge to Guernsey taxation will arise on capital gains.
From 3 June 2019 the Group elected into the UK REIT regime. The UK REIT rules exempt the profits from the Group’s property
rental business, arising from both income and capital gains. The Group is otherwise subject to UK corporation tax at the prevailing
rate. As the principal company of the REIT, the Company is required to distribute at least 90 per cent of the income profits of the
Group’s UK property rental business. There are a number of other conditions that also require to be met by the Group to maintain
REIT tax status. These conditions were met for the year ended 31 December 2023 and for the year ended 31 December 2022 and
the Board intends to conduct the Group’s affairs such that these conditions continue to be met.
7. Basic and diluted earnings per share
2023 | 2022 | |
Return per share – pence | (3.7)p | (13.1)p |
Net loss attributable to ordinary shareholders (£’000) | (26,067) | (94,377) |
Weighted average of Ordinary Shares in issue during the year | 701,550,187 | 720,956,458 |
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| 2023 | 2023 | 2022 | 2022 | |
| Total | PID Rate | Total | PID Rate | |
| £’000 | (pence) | £’000 | (pence) | |
| In respect of the previous period: | ||||
Ninth interim dividend | 2,806 | 0.40 | 2,817 | 0.375 |
Tenth interim dividend | 2,806 | 0.40 | 2,804 | 0.375 |
Eleventh interim dividend | 2,806 | 0.40 | 2,774 | 0.375 |
Twelfth interim dividend | 2,806 | 0.40 | 2,758 | 0.375 |
| In respect of the period under review: | ||||
First interim dividend | 2,806 | 0.40 | 2,920 | 0.40 |
Second interim dividend | 2,806 | 0.40 | 2,899 | 0.40 |
Third interim dividend | 2,806 | 0.40 | 2,862 | 0.40 |
Fourth interim dividend | 2,806 | 0.40 | 2,833 | 0.40 |
Fifth interim dividend | 2,806 | 0.40 | 2,806 | 0.40 |
Sixth interim dividend | 3,087 | 0.44 | 2,806 | 0.40 |
Seventh interim dividend | 3,087 | 0.44 | 2,806 | 0.40 |
Eighth interim dividend | 3,088 | 0.44 | 2,806 | 0.40 |
34,516 | 33,891 |
Property Income Distributions: | Record date | Payment date | Rate (pence) |
Ninth interim | 12 January 2024 | 31 January 2024 | 0.44 |
Tenth interim | 16 February 2024 | 29 February 2024 | 0.44 |
Eleventh interim | 15 March 2024 | 28 March 2024 | 0.44 |
Twelfth interim | 12 April 2024 | 30 April 2024 | 0.44 |
9. Investment properties
| 2023 | 2022 | |
| £’000 | £’000 | |
| Non-current assets – Investment properties | ||
| Freehold and leasehold properties | ||
Opening fair value | 1,075,082 | 1,180,486 |
Sales – proceeds | (14,300) | – |
– loss on sale | (12,896) | (5) |
Purchase of investment properties | 603 | 439 |
Capital expenditure | 8,358 | 23,258 |
Unrealised losses realised during the year | 8,363 | – |
Unrealised gains on investment properties | 20,781 | 94 |
Unrealised losses on investment properties | (77,721) | (129,190) |
Transfer to assets classified as held for sale | (71,277) | – |
Closing fair value | 936,993 | 1,075,082 |
Historic cost at the end of the year | 850,793 | 928,922 |
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9. Investment properties (continued)
| 2023 | 2022 | |
| £’000 | £’000 | |
Unrealised gains | 20,781 | 94 |
Unrealised losses | (77,721) | (129,190) |
Unrealised losses on revaluation of investment properties | (56,940) | (129,096) |
| 2023 | 2022 | |
| £’000 | £’000 | |
Losses on sale | (12,896) | (5) |
Unrealised losses realised during the year | 8,363 | – |
Losses on sale of investment properties realised | (4,533) | (5) |
The fair value of investment properties reconciled to the appraised value as follows:
| 2023 | 2022 | |
| £’000 | £’000 | |
Appraised value prepared by CBRE | 952,400 | 1,097,100 |
Capital and rental lease incentives held as trade and other receivables (note 10) | (15,407) | (22,018) |
Closing fair value | 936,993 | 1,075,082 |
The assets classified as held for sale reconciled to the appraised value as follows:
| 2023 | 2022 | |
| £’000 | £’000 | |
Appraised value prepared by CBRE of assets classified as held for sale | 75,065 | – |
Capital and lease incentives held as trade and other receivables (note 10) | (3,523) | – |
Selling costs of assets held for sale | (265) | – |
Closing fair value | 71,277 | – |
Historic cost at the end of the year | 59,894 | – |
All the Group’s investment properties were valued as at 31 December 2023 by RICS Registered Valuers working for CBRE Limited
(‘CBRE’), commercial real estate advisors, acting in the capacity of a valuation adviser to the AIFM. All such valuers are Chartered
Surveyors, being members of the Royal Institution of Chartered Surveyors (‘RICS’).
CBRE completed the valuation of the Group’s investment properties at 31 December 2023 on a fair value basis and in accordance
with The RICS Valuation – Global Standards (incorporating the International Valuation Standards) and the UK national supplement
(the “Red Book”). The CBRE valuation report is dated 16
January 2024 (the ‘Valuation Report’). Fair value is defined by IFRS 13
as ‘the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market
participants at the measurement date”. The techniques used for valuing investment properties are detailed in note 1(f).
CBRE has been carrying out valuations for the Group for a continuous period since December 2011. CBRE also values properties
held by other companies for which the Columbia Threadneedle Investments group is also the investment manager. CBRE provides,
and has provided in the past, ad hoc investment and occupational agency advice, landlord and tenant and building consultancy
advice to members of the Columbia Threadneedle Investments group. The proportion of total fees payable by the Columbia
Threadneedle Investments group to the total fee income of CBRE was less than 5 per cent of CBRE’s total UK revenues.
The property valuer is independent and external to the Group.
The property valuer takes account of deleterious materials included in the construction of the investment properties in arriving at its
estimate of fair value, when the Managers advise the presence of such materials. In arriving at their estimate of appraisal values, the
valuer has used their market knowledge and professional judgement and not only relied on historical transactional comparables.
All leasehold properties are carried at fair value rather than amortised over the term of the lease. The same valuation criteria are
therefore applied to leasehold as freehold properties. All leasehold properties have more than 60 years remaining on the lease term.
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9. Investment properties (continued)
The Group has entered into leases on its property portfolio as lessor (see note 19 for further information). All of the properties per
fair value band are shown on page 22.
In accordance with the loan agreements, there are some restrictions on the realisability of the Group’s investment properties or on the
remittance of income or proceeds of disposal. These restrictions are detailed in note 13.
Other than the capital commitments disclosed in note 18, the Group is under no contractual obligations to purchase, construct or
develop any investment property. The majority of leases are on a full repairing basis and, as such, the Group is not liable for costs
in respect of repairs, maintenance or enhancements to those investment properties.
All investment properties are categorised as level 3 fair values as they use significant unobservable inputs. There have not been
any transfers between levels during the year. Investment properties have been classed according to their real estate sector.
Information on these significant unobservable inputs per class of investment property is disclosed below.
| 2023 | 2022 | |||||||
| Valuation | 2023 | Weighted | 2022 | Weighted | ||||
| Sector | £’000 | Significant Assumption | Range * | Average | Range * | Average | ||
Retail | £189,300 | Current Rental Value per square foot (‘psf’) per annum | £26-£104 | £79 | £18-£96 | £69 | ||
(2022: | 190,352) | |||||||
Estimated Rental Value psf per annum | £28-£96 | £68 | £25-£98 | £76 | ||||
Net Initial Yield | 3.6%-8.9% | 4.7% | 3.6%-5.2% | 4.2% | ||||
Equivalent Yield | 3.6%-8.1% | 5.1% | 3.6%-7.5% | 5.0% | ||||
Estimated Capital Value psf | £319-£2,219 | £1,747 | £340-£2,240 | £1,724 | ||||
Retail Warehouse | £125,800 | Current Rental Value psf per annum | £23-£26 | £24 | £13-£24 | £22 | ||
(2022: | 127,525) | |||||||
Estimated Rental Value psf per annum | £23-£26 | £24 | £22-£26 | £24 | ||||
Net Initial Yield | 6.2%-7.5% | 6.3% | 3.4%-5.7% | 5.7% | ||||
Equivalent Yield | 6.0%-7.2% | 6.2% | 5.9%-6.7% | 6.1% | ||||
Estimated Capital Value psf | £323-£388 | £361 | £331-£386 | £365 | ||||
Office | £271,879 | Current Rental Value psf per annum | £0-£78 | £34 | £0-£73 | £30 | ||
(2022: | 346,945) | |||||||
Estimated Rental Value psf per annum | £21-£104 | £38 | £19-£86 | £34 | ||||
Net Initial Yield | 0.0%-14.4% | 7.4% | 0.0%-10.4% | 5.7% | ||||
Equivalent Yield | 4.2%-12.1% | 7.9% | 4.0%-9.0% | 6.0% | ||||
Estimated Capital Value psf | £86-£2,054 | £687 | £125-£1,851 | £617 | ||||
Industrial | £331,825 | Current Rental Value psf per annum | £0-£11 | £6 | £0-£10 | £6 | ||
(202 2: | 317,375) | |||||||
Estimated Rental Value psf per annum | £7-£14 | £8 | £6-£12 | £8 | ||||
Net Initial Yield | 0.0%-5.6% | 4.5% | 0.0%-5.5% | 4.6% | ||||
Equivalent Yield | 5.6%-6.5% | 6.0% | 5.3%-6.5% | 5.9% | ||||
Estimated Capital Value psf | £94-£192 | £125 | £96-£163 | £116 | ||||
Alternatives | £108,396 | Current Rental Value psf per annum | £0-£18 | £17 | £0-£18 | £17 | ||
(2022: | 114,903) | ** | ||||||
| Estimated Rental Value psf per annum | £0-£16 | £16 | £0-£14 | £6 | ||||
| Net Initial Yield | 4.8%-9.3% | 6.1% | 4.5%-8.2% | 5.6% | ||||
| Equivalent Yield | 4.7%-7.5% | 5.5% | 4.5%-6.7% | 5.2% | ||||
| Estimated Capital Value psf | £194-£1,014 | £616 | £0-£943 | £462 |
**
**
**
**
* The ranges are based on averages per property and include properties which were vacant at the date of valuation. Individual tenancies within properties may fall
outside these ranges.
** Excluding residential property – valuation technique for residential property is on a comparison basis.
For the majority of properties, the fair value was determined by using the market comparable method. This means that valuations
performed by CBRE are based on inputs determined from active markets, adjusted for differences in the nature, location or
condition of the specific property. Most valuations are based on equivalent yield, although net initial yield may also be taken
into consideration. Where properties are vacant at the date of valuation a comparable capital value per square foot is used. In
determining the net initial yield, or capital value per square foot, the valuers may have regard to the terms of any existing lease
including current rental values, lease length and covenant strength, along with assumptions regarding estimated rental values,
rental growth rates, vacancy rates and void or rent free periods expected after the end of each lease.
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9. Investment properties (continued)
| Retail | ||||||
| Estimated movement in fair value of investment | Retail | Warehouses | Offices | Industrial | Alternatives | Total |
| properties at 31 December 2023 arising from: | £’000 | £’000 | £’000 | £’000 | £’000 | £’000 |
Increase in passing rental value by 5% | 9,465 | 6,290 | 13,594 | 16,591 | 5,420 | 51,360 |
Decrease in passing rental value by 5% | (9,465) | (6,290) | (13,594) | (16,591) | (5,420) | (51,360) |
Increase in equivalent yield by 1.5% | (42,978) | (24,562) | (43,542) | (66,391) | (23,296) | (200,769) |
Decrease in equivalent yield by 1.5% | 78,724 | 40,298 | 64,060 | 110,681 | 40,858 | 334,621 |
| Retail | ||||||
| Estimated movement in fair value of investment | Retail | Warehouses | Offices | Industrial | Alternatives | Total |
| properties at 31 December 2022 arising from: | £’000 | £’000 | £’000 | £’000 | £’000 | £’000 |
Increase in passing rental value by 5% | 9,518 | 6,376 | 17,347 | 15,869 | 5,745 | 54,855 |
Decrease in passing rental value by 5% | (9,518) | (6,376) | (17,347) | (15,869) | (5,745) | (54,855) |
Increase in equivalent yield by 1.5% | (44,128) | (25,303) | (69,641) | (64,488) | (25,908) | (229,468) |
Decrease in equivalent yield by 1.5% | 82,273 | 41,951 | 116,350 | 108,636 | 47,188 | 396,398 |
| 2023 | 2022 | |
| Non-current | £’000 | £’000 |
Capital and rental lease incentives | 11,580 | 18,122 |
Cash deposits held for tenants | 2,774 | 2,250 |
14,354 | 20,372 |
| 2023 | 2022 | |
| Current | £’000 | £’000 |
Capital and rental lease incentives | 7,350 | 3,896 |
Cash deposits held for tenants | 495 | 505 |
Rents receivable | 3,834 | 5,187 |
Impairment provision | (2,475) | (2,065) |
VAT receivable | – | 1,448 |
Taxation receivable | 72 | 73 |
Other debtors and prepayments | 2,729 | 3,767 |
12,005 | 12,811 |
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10. Trade and other receivables (continued)
| 2023 | 2022 | |
| Impairment provision | £’000 | £’000 |
Accumulated impairment provision as at 1 January | 2,065 | 2,987 |
Impairment provision expensed/(reversed) during the year, net | 538 | (478) |
Amounts written off during the year as uncollectable | (128) | (444) |
Accumulated impairment provision as at 31 December | 2,475 | 2,065 |
| 2023 | 2022 | |
| Non-current | £’000 | £’000 |
Rental deposits | 2,774 | 2,250 |
| 2023 | 2022 | |
| Current | £’000 | £’000 |
Rental income received in advance | 9,364 | 9,086 |
Rental deposits | 495 | 505 |
VAT payable | 109 | – |
Managers’ fees payable | 1,496 | 5,267 |
Other payables | 5,603 | 6,282 |
17,067 | 21,140 |
| 2023 | 2022 | |
| £’000 | £’000 | |
| £260m L&G loan | ||
Principal amount outstanding | 260,000 | 260,000 |
Set-up costs | (2,683) | (2,683) |
Amortisation of set-up costs | 2,372 | 2,071 |
259,689 | 259,388 | |
| £100m Barclays loan (repaid) | ||
Principal amount outstanding | – | 50,000 |
Set-up costs | (910) | (910) |
Additional set-up costs occured during the year for loan extension | (173) | – |
Amortisation of set-up costs | 916 | 799 |
Set-up costs written-off on repayment of loan | 167 | – |
– | 49,889 | |
| £320m Barclays/HSBC loan | ||
Principal amount outstanding | 30,000 | – |
Set-up costs* | (3,758) | – |
Amortisation of set-up costs | 535 | – |
26,777 | – | |
Total interest-bearing loans | 286,466 | 309,277 |
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13. Interest-bearing loans and interest rate swap (continued)
| Interest- | 2023 | Interest- | 2022 | |||
| Cash and cash | bearing | Net | Cash and cash | bearing | Net | |
| equivalents | loans | debt | equivalents | loans | debt | |
| £’000 | £’000 | £’000 | £’000 | £’000 | £’000 | |
Opening balance | 54,837 | (309,277) | (254,440) | 138,081 | (308,641) | (170,560) |
Cash movement | (13,120) | 3,931 | (9,189) | (83,244) | 6 | (83,238) |
Barclays loan repayment | – | 50,000 | 50,000 | – | – | – |
Barclays/HSBC loan drawdown | – | (30,000) | (30,000) | – | – | – |
Amortisation of loan set-up costs | – | (953) | (953) | – | (642) | (642) |
Set-up costs written-off on repayment of Barclays loan | – | (167) | (167) | – | – | – |
Closing balance | 41,717 | (286,466) | (244,749) | 54,837 | (309,277) | (254,440) |
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13. Interest-bearing loans and interest rate swap (continued)
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13. Interest-bearing loans and interest rate swap (continued)
| Held in | ||||||
| Listed | Treasury | In issue | ||||
| Number | £’000 | Number | £’000 | Number | £’000 | |
| Allotted, called up and fully paid | ||||||
Ordinary shares of 1 pence each Balance at 1 January 2023 | 799,366,108 | 7,994 | (97,815,921) | (979) | 701,550,187 | 7,015 |
Balance at 31 December 2023 | 799,366,108 | 7,994 | (97,815,921) | (979) | 701,550,187 | 7,015 |
| Held in | ||||||
| Listed | Treasury | In issue | ||||
| Number | £’000 | Number | £’000 | Number | £’000 | |
| Allotted, called up and fully paid | ||||||
Ordinary shares of 1 pence each Balance at 1 January 2022 | 799,366,108 | 7,994 | (46,260,278) | (463) | 753,105,830 | 7,531 |
Shares bought back to be held in treasury | – | – | (51,555,643) | (516) | (51,555,643) | (516) |
Balance at 31 December 2022 | 799,366,108 | 7,994 | (97,815,921) | (979) | 701,550,187 | 7,015 |
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14. Share capital and capital risk management (continued)
| 2023 | 2022 | ||
| £’000 | £’000 | ||
Interest bearing loans | 290,000 | 310,000 | |
Less cash and cash equivalents | (41,717) | (54,837) | |
Total | (a) | 248,283 | 255,163 |
Total assets less current liabilities and cash (excluding current interest-bearing loan) | (b) | 1,017,562 | 1,088,155 |
Net Gearing (c = a/b) | (c) | 24.4% | 23.4% |
15. Net asset value per share
2023 | 2022 | |
Net asset value per ordinary share – pence | 109.8p | 118.5p |
Net assets attributable at the year end (£’000) | 770,039 | 831,465 |
Number of ordinary shares in issue at the year end | 701,550,187 | 701,550,187 |
17. Financial risk management
The Group’s investment objective is to provide ordinary shareholders with an attractive level of income together with the potential
for capital and income growth from investing in a diversified UK commercial property portfolio.
Consistent with that objective, the Group holds UK commercial property investments. In addition, the Group’s financial instruments
during the year comprised interest-bearing loans, cash, trade receivables and payables that arise directly from its operations. The
Group does not have exposure to any derivative instruments at 31 December 2023. The interest rate swap entered into to hedge
the interest paid on £50 million Barclays term loan expired in July 2023.
The Group is exposed to various types of risk that are associated with financial instr
uments. The most important types are credit
risk, liquidity risk, interest rate risk and market price risk. There is no foreign currency risk as all assets and liabilities of the Group
are maintained in pounds sterling.
The Board reviews and agrees policies for managing the Group’s risk exposure. These policies are summarised below and have
remained unchanged for the year under review. These disclosures include, where appropriate, consideration of the Group’s
investment properties which, whilst not constituting financial instruments as defined by IFRS, are considered by the Board to be
integral to the Group’s overall risk exposure.
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17. Financial risk management (continued)
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17. Financial risk management (continued)
| Within | More than | ||||
| one year | 1–2 years | 3–5 years | 5 years | Total | |
| Financial assets | £’000 | £’000 | £’000 | £’000 | £’000 |
| As at 31 December 2023 | |||||
Cash and cash equivalents | 41,717 | – | – | – | 41,717 |
Trade and other receivables | 1,854 | 398 | 889 | 1,487 | 4,628 |
| As at 31 December 2022 | |||||
Cash and cash equivalents | 54,837 | – | – | – | 54,837 |
Trade and other receivables | 3,627 | 338 | 913 | 999 | 5,877 |
| Within | More than | ||||
| one year | 1–2 years | 3–5 years | 5 years | Total | |
| Financial liabilities | £’000 | £’000 | £’000 | £’000 | £’000 |
| As at 31 December 2023 | |||||
Trade and other payables | 7,594 | 398 | 889 | 1,487 | 10,368 |
| Interest bearing £60m Barclays/HSBC | |||||
revolving credit facility | 422 | 30,000 | – | – | 30,422 |
Interest-bearing £260m L&G loan | 268,882 | – | – | – | 268,882 |
| As at 31 December 2022 | |||||
Trade and other payables | 12,054 | 338 | 913 | 999 | 14,304 |
Interest-bearing £50m Barclays term loan, interest rate swap and commitment fee | 50,912 | – | – | – | 50,912 |
Interest-bearing £260m L&G loan | 8,882 | 268,882 | – | – | 277,764 |
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17. Financial risk management (continued)
| Weighted | ||||||
| Assets | Weighted | average | ||||
| where no | average | period for | ||||
| Fixed | Variable | interest is | interest | which rate | ||
| Total | rate | rate | received | rate | is fixed | |
| £’000 | £’000 | £’000 | £’000 | % | (years) | |
| As at 31 December 2023 | ||||||
| Financial assets | ||||||
Cash and cash equivalents | 41,717 | – | 41,717 | – | 3.76 | – |
Cash deposits held for tenants | 3,269 | – | – | 3,269 | – | – |
Rent receivable and impairment provision | 1,359 | – | – | 1,359 | – | – |
| Financial liabilities | ||||||
L&G loan | 259,689 | 259,689 | – | – | 3.32 | 1.0 |
Barclays/HSBC loan | 26,777 | – | 26,777 | – | 7.07 | – |
| As at 31 December 2022 | ||||||
| Financial assets | ||||||
Cash and cash equivalents | 54,837 | – | 54,837 | – | 3.15 | – |
Interest rate swap | 1,030 | 1,030 | – | – | 0.517 | 0.58 |
Cash deposits held for tenants | 2,755 | – | – | 2,755 | – | – |
Rent receivable and impairment provision | 3,122 | – | – | 3,122 | – | – |
| Financial liabilities | ||||||
L&G loan | 259,388 | 259,388 | – | • | 3.32 | 2.0 |
Barclays loan | 49,889 | 49,889 | – | – | 2.367 | 0.58 |
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| 2023 | 2022 | |
| £’000 | £’000 | |
Less than one year | 54,371 | 57,642 |
Later than one year and no later than two years | 52,336 | 53,544 |
Later than two years and no later than three years | 48,129 | 49,303 |
Later than three years and no later than four years | 42,930 | 44,918 |
Later than four years and no later than five years | 37,358 | 39,263 |
Later than five years | 162,838 | 181,115 |
Total | 397,962 | 425,785 |
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21. Securities financing transactions (“SFT”)
The Company has not, in the year to 31 December 2023 (2022: same), participated in any: repurchase transactions; securities
lending or borrowing; buy-sell back transaction; margin lending transaction; or total return swap transactions (collectively called
SFT). As such, it has no disclosure to make in satisfaction of the EU resolutions on transparency of SFT, issued in November 2015.
22. Subsequent events
In December 2023, the Company exchanged contracts on the sale of 2-4 King Street, London SW1, a multi-let holding of
15,000 sq ft in London’s West End. The sale completed mid-January 2024 at a price of £28.5 million.
Post year-end, the Company exchanged contracts on the sale of the Leonardo Building in Crawley, a 110,000 sq. ft. out-of-town
business park office. The sale was exchanged unconditionally based on a headline price of £26.1 million, representing a 6.1%
discount to the December 2023 independent valuation. The sale completed in March 2024.
On 28 March 2024, the Company repaid the £30 million which was drawn down on the revolving credit facility with Barclays/HSBC at
31 December 2023. At 26
April 2024, the full £60 million revolving credit facility is available for drawdown.
On 15 April 2024, the Board announced the commencement of a Strategic Review. The Continuation Vote and the Strategic Review
are covered on page 4 of the Chairman’s Statement. The Board looks forward to updating shareholders on the progress of the
Strategic Review and will make further announcements in due course, noting that there is currently no certainty as to the outcome.
It is expected that the outcome of the Strategic Review will be able to be announced in Q3 2024.
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AIFM Disclosure
Alternative Investment Fund Managers (‘AIFM’) Directive
In accordance with the AIFM Directive, information in relation to the Group’s leverage and the remuneration of the Company’s
AIFM, Columbia Threadneedle Investment Business Limited, is required to be made available to shareholders. Detailed regulatory
disclosures including those on the AIFM’s remuneration policy and costs are available on the Company’s website or Columbia
Threadneedle on request.
The Group’s maximum and average actual leverage levels at 31 December 2023 are shown below:
Leverage exposure Gross method
Commitment
method
Maximum limit 300% 300%
Actual 131% 136%
For the purposes of the AIFM Directive, leverage is any method which increases the Group’s exposure, including the borrowing of
cash and the use of derivatives. It is expressed as a percentage of the Group’s exposure to its net asset value and is calculated
on both a gross and commitment method.
Under the gross method, exposure represents the sum of the Group’s positions after deduction of cash balances, without taking
account of any hedging or netting arrangements. Under the commitment method, exposure is calculated without the deduction of
cash balances and after certain hedging and netting positions are offset against each other.
The leverage limits are set by the AIFM and approved by the Board and are in line with the maximum leverage levels permitted
in the Company’s Articles of Incorporation. The AIFM is also required to comply with the gearing parameters set by the Board in
relation to borrowings.
Detailed regulatory disclosures to investors in accordance with the AIFM Directive are contained on the Company’s website under
Key Documents.
An Investor Disclosure Document for the Company is available on the Company’s website: balancedcommercialproperty.co.uk
Headlines and
Performance Summary
82 | Balanced Commercial Property Trust Limited
Notice of Annual General Meeting
Notice of Annual General Meeting
Notice is hereby given that the Annual General Meeting of
Balanced Commercial Property Trust Limited will be held in the
building of the Company’s UK legal advisers, Dickson Minto WS,
at Dashwood House, 69 Old Broad Street, London EC2M 1QS on
Thursday 20 June 2024 at 12.30pm. The meeting will address
the following:
To consider and, if thought fit, pass the following as Ordinary
Resolutions:
1. That the Annual Report and Consolidated Financial
Statements for the year ended 31 December 2023 be
received and adopted.
2
. That the Directors’ Remuneration Report as set out in
the Annual Report for the year ended 31 December 2023
be approved.
3. That the dividend policy as set out in the Annual Report
be approved.
4. That Mr J Wythe, who retires annually, be re-elected as
a Director.
5. That Mr P Marcuse, who retires annually, be re-elected as
a Director.
6. That Mrs L Wilding, who retires annually, be re-elected as
a Director.
7. That Ms I Sharp, who retires annually, be re-elected as a
Director.
8. That Ms K Fahmy be elected as a Director.
9. That PricewaterhouseCoopers CI LLP be re-appointed as
independent auditor.
10
. That the Directors be authorised to determine the
independent auditor’s remuneration.
11
. That, to the extent required by sections 291 (or otherwise)
of The Companies (Guernsey) Law, 2008 the Directors be
generally and unconditionally authorised to issue and allot
shares comprised in the share capital of the Company as
described in the Company’s articles of incorporation (or
grant options, warrants or other rights in respect of shares
in the Company (the “Rights”)) provided that:
(a) this authority shall be limited to the allotment and
issuance of shares or Rights to be granted in respect
of shares with an aggregate nominal value of up to
£701,550, being approximately 10 per cent of the
nominal value of the issued share capital of the
Company (excluding treasury shares) as at 25
April
2024 and further provided that this authority shall,
unless renewed, varied or revoked by the Company,
expire at the conclusion of the next Annual General
Meeting of the Company after the passing of this
resolution or on expiry of 15 months from the
passing of this resolution, whichever is earlier,
save that the Company may, before such expiry,
make an offer or agreement which would or might
require shares to be allotted and issued or Rights
to be granted and the Directors may allot and issue
shares or grant Rights in pursuance of such offer
or agreement notwithstanding that the authority
conferred by this ordinary resolution has expired; and
(b) this authority is in substitution for all previous
authorities conferred on the Directors in accordance
with sections 291 (or otherwise) of The Companies
(Guernsey) Law, 2008 but without prejudice to any
allotment or issuance of shares or grant of Rights
already made or offered or agreed to be made
pursuant to such authorities.
To consider and, if thought fit, pass the following as Special
Resolutions:
12
. That the Directors of the Company be and they are hereby
generally empowered, to allot and issue ordinary shares in
the Company or grant rights to subscribe for, or to convert
securities into, ordinary shares in the Company (‘‘equity
securities’’) for cash, including by way of a sale of ordinary
shares held by the Company as treasury shares, as if
any pre-emption rights in relation to the issue of shares
contained in Article 6.2 of the Company’s articles of
incorporation did not apply to any such allotment of equity
securities, provided that this power:
(a) expires at the conclusion of the next Annual General
Meeting of the Company after the passing of this
resolution or on the expiry of 15 months from the
passing of this resolution, whichever is the earlier,
save that the Company may, before such expiry, make
an offer or agreement which would or might require
equity securities to be allotted after such expiry and
the Directors may allot equity securities in pursuance
of any such offer or agreement as if the power
conferred hereby had not expired; and
2023 Annual Report and Consolidated Financial Statements | 83
Notice of Annual General Meeting
Governance Report Auditor's Report
Notice of AGM Other InformationStrategic Report
Financial Report
(b) shall be limited to the allotment of equity securities
up to an aggregate nominal value of £701,550 being
approximately 10 per cent of the nominal value of
the issued share capital of the Company (excluding
treasury shares), as at 25
April 2024.
13
. That the Company be authorised, in accordance with
section 315 of The Companies (Guernsey) Law 2008, to
make market acquisitions (within the meaning of section
316(1) of The Companies (Guernsey) Law 2008 of
ordinary shares of 1p each (‘‘Ordinary Shares’’) (either for
retention as treasury shares for future resale or transfer,
or cancellation), provided that:
(a) the maximum number of Ordinary Shares hereby
authorised to be purchased shall be 14.99 per cent
of the issued Ordinary Shares on the date on which
this resolution is passed;
(b) the minimum price which may be paid for an Ordinary
Share shall be 1p (exclusive of expenses);
(c) the maximum price (exclusive of expenses) which
may be paid for an Ordinary Share shall be the higher
of (i) 105 per cent of the average of the middle
market quotations (as derived from the Daily Official
List) for the Ordinary Shares for the five business
days immediately preceding the date of purchase;
and (ii) the higher of the last independent trade and
the highest current independent bid on the trading
venue which the purchase is carried out; and
(d) unless previously varied, revoked or renewed,
the authority hereby conferred shall expire at the
conclusion of the next Annual General Meeting of
the Company after the passing of this resolution, or
on the expiry of 18 months from the passing of this
resolution, whichever is the earlier, save that the
Company may, prior to such expiry, enter into a contract
to purchase Ordinary Shares under such authority
which will or may be executed wholly or partly after the
expiration of such authority and may make a purchase
of Ordinary Shares pursuant to any such contract.
By order of the Board
Northern Trust International Fund Administration Services
(Guernsey) Limited
Secretary
PO Box 255, Trafalgar Court, Les Banques, St. Peter Port,
Guernsey, Channel Islands GY1 3QL
26
April 2024
Notes:
1. A member who is entitled to attend, speak and vote at the Meeting
is entitled to appoint one or more proxies to attend, speak and
vote instead of him or her. A proxy need not be a member of
the Company.
2. More than one proxy may be appointed provided each proxy is
appointed to exercise the rights attached to different shares.
3. A form of proxy is enclosed for use at the Meeting. The form of
proxy should be completed and sent, together with the power
of attorney or other authority (if any) under which it is signed,
or a notarially certified copy of such power or authority, so as to
reach the Company’s registrars Computershare Investor Services
(Guernsey) Limited, c/o The Pavilions, Bridgwater Road, Bristol
BS99 6ZY not later than 12.30pm on 18 June 2024.
4. Completing and returning a form of proxy will not prevent a member
from attending in person at the Meeting should he or she so wish.
5. To have the right to attend and vote at the Meeting (and also for
the purposes of calculating how many votes a member may cast on
a poll) a member must first have his or her name entered on the
register of members not later than close of business on 18 June
2024. Changes to entries in the register after that time shall be
disregarded in determining the rights of any member to attend and
vote at such Meeting.
6. As at 25 April 2024, the latest practicable date prior to publication
of this document, the Company had 799,366,108 Ordinary
Shares in issue. The number of shares with voting rights was
701,550,187, each carrying one voting right.
7. Any person holding 3 per cent or more of the total voting rights
in the Company who appoints a person other than the Chairman
as his proxy will need to ensure that both he and such third party
complies with their respective disclosure obligations under the
Disclosure Guidance and Transparency Rules.
8. The Directors’ letters of appointment will be available for inspection
from 15 minutes prior to, and at, the Annual General Meeting.
Headlines and
Performance Summary
84 | Balanced Commercial Property Trust Limited
Other Information
Shareholder Information
Dividends
Property Income Distributions are paid monthly. Shareholders
who wish to have dividends paid directly into a bank account
rather than by cheque to their registered address can complete
a mandate form for the purpose. Mandates may be obtained
from Computershare Investor Services (Guernsey) Limited,
c/o Queensway House, Hilgrove Street, St. Helier, Jersey
JE1 1ES on request. Where dividends are paid directly to
shareholders’ bank accounts, dividend tax vouchers are sent to
shareholders’ registered addresses.
Share Price
The Company’s Ordinary Shares are listed on the Main Market
of the London Stock Exchange. Prices are given daily in
the Financial Times under “Investment Companies” and in
other newspapers.
Data Protection
The Company is committed to ensuring the privacy and security
of any personal data provided to it. Further details of the
Company’s privacy policy can be found on its website which is
balancedcommercialproperty.co.uk
Change of Address
Communications with shareholders are mailed to the address
held on the share register. In the event of a change of address
or other amendment this should be notified to Computershare
Investor Services (Guernsey) Limited, c/o Queensway House,
Hilgrove Street, St. Helier, Jersey JE1 1ES under the signature
of the registered holder.
Shareholder Enquiries
Contact Northern Trust International Fund Administration
Services (Guernsey) Limited, Trafalgar Court, Les Banques,
St. Peter Port, Guernsey, Channel Islands GY1 3QL. Additional
information regarding the Company may also be found on its
website which is: balancedcommercialproperty.co.uk
Common reporting standards
Tax legislation requires investment fund companies to
provide information annually to the local tax authority on the
tax residencies of a number of non-UK based certificated
Shareholders and corporate entities who have purchased
shares in investment companies. All new Shareholders,
excluding those whose shares are held in CREST, who are
entered onto the share register are sent a certification form for
the purpose of collecting this information.
Key Information Document
The Key Information Document relating to the Company’s shares
can be found on its website at balancedcommercialproperty.co.uk.
This document has been produced in accordance with the UK
version of the EU’s PRIIPs Regulations.
Warning to Shareholders – Beware of Share Fraud
Fraudsters use persuasive and high-pressure tactics to lure investors into scams. They may offer to sell shares that turn out to be
worthless or non-existent, or to buy shares at an inflated price in return for an upfront payment.
If you receive unsolicited investment advice or requests:
• Check the Financial Services Register from fca.org.uk to see if the person or firm contacting you is authorised by the FCA
• Call the Financial Conduct Authority (“FCA”) on 0800 111 6768 if the firm does not have contact details on the Register or you
are told they are out of date
• Search the list of unauthorised firms to avoid at fca.org.uk/scams
• Consider that if you buy or sell shares from an unauthorised firm you will not have access to the Financial Ombudsman Service
or Financial Services Compensation Scheme
• Think about getting independent financial and professional advice
If you are approached by fraudsters please tell the FCA by using the share fraud reporting form at fca.org.uk/scams where you can
find out more about investment scams. You can also call the FCA Consumer Helpline on 0800 111 6768. If you have already paid
money to share fraudsters you should contact Action Fraud on 0300 123 2040.
2023 Annual Report and Consolidated Financial Statements | 85
Other Information
Governance Report Auditor's Report
Notice of AGM Other InformationStrategic Report
Financial Report
Historic Record
Total
assets less
current
liabilities
£’000
Shareholders’
funds
£’000
Net asset
value per
Ordinary
Share
p
Ordinary
Share
price
p
Premium/
(discount)
%
Earnings
per Ordinary
Share
p
Dividends
per Ordinary
Share
p
Ongoing
charges
*
%
18 March 2005 (launch) 943,288 713,288 97.0 100.0 3.1 – – –
31 December 2005 1,092,522 863,458 117.5 118.5 0.9 20.7 1.75 1.35
31 December 2006 1,269,122 1,039,769 141.5 131.0 (7.4) 30.0 6.00 1.32
31 December 2007 1,175,822
‡
946,222
‡
129.2
‡
90.5 (30.0)
‡
(7.7)
‡
6.00 1.27
31 December 2008 813,941 584,183 85.8 62.0 (27.7) (39.8) 6.00 1.35
31 December 2009 819,322 589,388 86.6 90.0 3.9 6.8 6.00 2.36
31 December 2010 934,223 655,081 96.3 105.6 9.7 15.7 6.00 2.06
31 December 2011 967,301 684,243 100.5 101.6 1.1 10.8 6.00 1.62
31 December 2012 1,019,525 736,031 98.8 103.7 5.0 4.2 6.00 1.62
31 December 2013 1,080,435 799,014 105.3 120.5 14.4 12.2 6.00 1.67
31 December 2014 1,285,546 975,980 122.1 136.4 11.7 22.5
6.00 1.41
31 December 2015 1,390,547 1,080,424 135.2 134.4 (0.6) 19.0 6.00 1.20
31 December 2016 1,393,072 1,083,445 135.5 136.4 0.7 6.3 6.00 1.07
31 December 2017 1,438,397 1,128,650 141.2 135.9 (3.8) 11.6 6.00 1.20
31 December 2018 1,427,310 1,117,448 139.8 124.6 (10.9) 4.6 6.00 1.18
31 December 2019 1,357,394 1,046,692 130.9 115.6 (11.7) (2.8) 6.00 1.19
31 December 2020 1,249,861 939,644 117.5 80.0 (31.9) (10.5) 2.85 1.13
31 December 2021 1,328,577 1,017,520 135.1 105.0 (22.3) 19.8 4.25 1.31
31 December 2022 1,093,103 831,465 118.5 88.5 (25.3) (13.1) 4.70 1.39
31 December 2023 799,590 770,039 109.8 72.5 (34.0) (3.7) 4.92 1.54
*
Includes direct property costs and performance fee for years 2005 to 2016. From 2017 the Investment Managers are not entitled to a performance fee.
‡
Stated after application of a 10 per cent discount to the value of the Company’s investments in indirect property funds.
Financial Calendar 2024/25
20 June 2024 Annual General Meeting
September 2024 Announcement of interim results
Posting of Interim Report
March 2025 Announcement of annual results
Posting of Annual Report
Headlines and
Performance Summary
86 | Balanced Commercial Property Trust Limited
Other Information
Alternative Performance Measures
The Company uses the following Alternative Performance Measures (‘APMs’). APMs do not have a standard meaning prescribed by
GAAP and therefore may not be comparable to similar measures presented by other entities.
Discount or Premium – the share price of an Investment Company is derived from buyers and sellers trading their shares on the
stock market. This price is not identical to the NAV. If the share price is lower than the NAV per share, the shares are trading at a
discount. This could indicate that there are more sellers than buyers. Shares trading at a price above the NAV per share, are said
to be at a premium.
2023
pence
2022
pence
Net Asset Value per share (a) 109.8 118.5
Share price per share (b) 72.5 88.5
Discount (c = (b-a)/a) (c) (34.0)% (25.3)%
Dividend Cover on a cash basis – The percentage by which profits for the year (less gains/losses on investment properties)
adjusted by capital and rental lease incentives amortisation and interest bearing loans amortisation of set-up costs cover the
dividends paid.
2023
£’000
2022
£’000
Loss for the year (26,067) (94,377)
Add back: Unrealised losses on revaluation of investment properties 56,940 129,096
Losses on sales of investment properties realised 4,533 5
Loss on maturity of interest rate swap 187 –
Capital and rental lease incentives amortisation 3,346 155
Interest bearing loans amortisation of set-up costs 953 642
Set-up costs written-off on £100m Barclays loan 167 –
Set-up costs of loan extension and £320m Barclays/HSBC loan (3,931) –
Profit before investment losses and amortisation (a) 36,128 35,521
Dividends (b) 34,516 33,891
Dividend Cover on a cash basis (c = a/b) (c) 104.7% 104.8%
Accounting Dividend Cover – The percentage by which profits for the year (less gains/losses on investment properties and non-
recurring other income) cover the dividend paid.
2023
£’000
2022
£’000
Loss for the year (26,067) (94,377)
Add back: Unrealised losses on revaluation of investment properties 56,940 129,096
Losses on sales of investment properties realised 4,533 5
Loss on maturity of interest rate swap 187 –
Other income (119) (42)
Profit before investment losses and other income (a) 35,474 34,682
Dividends (b) 34,516 33,891
Accounting Dividend Cover (c = a/b) (c) 102.8% 102.3%
Dividend Yield – The dividends paid during the year divided by the share price at the year end. An analysis of dividends is
contained in note 8 to the financial statements.
2023 Annual Report and Consolidated Financial Statements | 87
Net Gearing – Borrowings less cash divided by total assets (less current liabilities and cash).
2023
£’000
2022
£’000
Interest bearing loans 290,000 310,000
Less cash and cash equivalents (41,717) (54,837)
Total (a) 248,283 255,163
Total assets less current liabilities and cash (excluding current interest-bearing loan) (b) 1,017,562 1,088,155
Net Gearing (c = a/b) (c) 24.4% 23.4%
Ongoing Charges – All operating costs incurred by the Group, expressed as a proportion of its average Net Assets over the
reporting year. The costs of buying and selling investments and derivatives are excluded, as are interest costs, taxation,
non-recurring costs and the costs of buying back or issuing Ordinary Shares. An additional Ongoing Charge figure is calculated
which excludes direct operating property costs as these are variable in nature and tend to be specific to lease events occurring
during the year.
2023
£’000
2022
£’000
Investment management fee (note 3) 5,968 6,861
Other expenses 7,336 6,479
Less non-recurring costs - impairment provision (note 4) (538) 478
Less other non-recurring costs (239) (30)
Total (a) 12,527 13,788
Average net assets (b) 811,005 991,293
Ongoing Charges (c = a/b) (c) 1.54% 1.39%
2023
£’000
2022
£’000
Investment management fee (note 3) 5,968 6,861
Other expenses 7,336 6,479
Less direct operating property costs (note 4) (4,728) (5,255)
Less non-recurring costs - impairment provision (note 4) (538) 478
Less other non-recurring costs (239) (30)
Total (a) 7,799 8,533
Average net assets (b) 811,005 991,293
Ongoing Charges excluding direct operating property costs (c = a/b) (c) 0.96% 0.86%
Portfolio (Property) Capital Return – The change in property value during the year after taking account of property purchases and
sales and capital expenditure, calculated on a quarterly time-weighted basis. The calculation is carried out by MSCI Inc.
Portfolio (Property) Income Return – The income derived from a property during the year as a percentage of the property value,
taking account of direct property expenditure, calculated on a quarterly time-weighted basis. The calculation is carried out by
MSCI Inc.
Portfolio (Property) Total Return – Combining the Portfolio Capital Return and Portfolio Income Return over the year, calculated on
a quarterly time-weighted basis. The calculation is carried out by MSCI Inc.
Other Information
Governance Report Auditor's Report
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Headlines and
Performance Summary
88 | Balanced Commercial Property Trust Limited
Total Return – The theoretical return to shareholders calculated on a per share basis by adding dividends paid in the year to the
increase or decrease in the Share Price or NAV. The dividends are assumed to have been reinvested in the form of Ordinary Shares
or Net Assets, respectively, on the date on which they were quoted ex-dividend.
2023 2022
NAV per share at start of year – pence 118.5 135.1
NAV per share at end of year – pence 109.8 118.5
Change in the year -7.3% –12.3%
Impact of dividend reinvestments +4.0% +3.1%
NAV total return for the year -3.3% –9.2%
2023 2022
Share price per share at start of year – pence 88.5 105.0
Share price per share at end of year – pence 72.5 88.5
Change in the year -18.1% –15.7%
Impact of dividend reinvestments +5.6% +4.0%
Share price total return for the year -12.5% –11.7%
Other Information
2023 Annual Report and Consolidated Financial Statements | 89
Other Information
Governance Report Auditor's Report
Notice of AGM Other InformationStrategic Report
Financial Report
EPRA Performance Measures
The European Public Real Estate Association (EPRA) is the industry body representing listed companies in the real estate sector.
EPRA publishes Best Practice Recommendations (BPR) to establish consistent reporting by European property companies. Further
information on the EPRA BPR can be found at epra.com
Note 2023 2022
EPRA NRV (£’000) 1 839,067 904,160
EPRA NRV (pence per share) 1 119.6 128.9
EPRA NTA (£’000) 1 770,039 830,435
EPRA NTA (pence per share) 1 109.8 118.4
EPRA NDV (£’000) 1 769,728 821,423
EPRA NDV (pence per share) 1 109.7 117.1
EPRA earnings (£’000) 2 35,593 34,724
EPRA earnings per share (pence per share) 2 5.1 4.8
EPRA Net Initial Yield 3 5.3% 4.6%
EPRA topped-up Net Initial Yield 3 5.4% 4.9%
EPRA Vacancy Rate 4 6.7% 5.9%
EPRA Cost Ratios - including direct vacancy costs 5 21.9% 22.4%
EPRA Cost Ratios - excluding direct vacancy costs 5 17.7% 19.5%
Capital expenditure (£’000) 6 8,961 23,697
1) In October 2019, EPRA published new best practice recommendations (BPR) for financial disclosures by public real
estate companies. The BPR introduced three new measures of net asset value: EPRA net tangible assets (NTA), EPRA net
re-investment value (NRV) and EPRA net disposal value (NDV).
EPRA Net Reinstatement Value (‘NRV’): Assumes that entities never sell assets and aims to represent the value assets required
to rebuild the entity.
EPRA Net Tangible Assets (‘NTA’): Assumes that entities buy and sell assets, thereby crystallising certain levels of unavoidable
deferred tax.
EPRA Net Disposal Value (‘NDV’): Represents the shareholders’ value under a disposal scenario, where deferred tax, financial
instruments and certain other adjustments are calculated to the full extent of their liability, net of any resulting tax.
2023
EPRA NRV
£’000
2023
EPRA NTA
£’000
2023
EPRA NDV
£’000
IFRS Net Asset Value 770,039 770,039 770,039
Fair value of debt – – (311)
Purchasers’ costs 69,028 – –
Net assets used in per share calculation 839,067 770,039 769,728
Shares in issue (000’s) 701,550 701,550 701,550
EPRA assets per share (pence per share) 119.6p 109.8p 109.7p
Headlines and
Performance Summary
90 | Balanced Commercial Property Trust Limited
2022
EPRA NRV
£’000
2022
EPRA NTA
£’000
2022
EPRA NDV
£’000
IFRS Net Asset Value 831,465 831,465 831,465
Fair value of interest rate swaps (1,030) (1,030) –
Fair value of debt – – (10,042)
Purchasers’ costs 73,725 – –
Net assets used in per share calculation 904,160 830,435 821,423
Shares in issue (000’s) 701,550 701,550 701,550
EPRA earnings per share (pence per share) 128.9 118.4 117.1
2) EPRA earnings – EPRA earnings represents the earnings from core operational activities, excluding investment property
revaluations and gains/losses on asset disposals. It demonstrates the extent to which dividend payments are underpinned by
recurring operational activities.
2023
£’000
2022
£’000
Loss for the year per IFRS income statement (26,067) (94,377)
Exclude:
Unrealised losses on revaluation of investment properties 56,940 129,096
Losses on sale of investment properties realised 4,533 5
Loss on maturity of interest rate swap 187 –
EPRA earnings 35,593 34,724
Weighted average number of shares in issue (000’s) 701,550 720,956
EPRA earnings per share (pence per share) 5.1 4.8
3) EPRA Net Initial Yield – EPRA NIY is calculated as the annualised rental income based on the cash rents passing at the
balance sheet date, less non-recoverable property operating expenses, divided by the gross market valuation of the properties.
2023
£’000
2022
£’000
Investment property valuation 1,027,200 1,097,100
Allowance for estimated purchasers’ costs 69,028 73,725
Grossed up property portfolio valuation (a) 1,096,228 1,170,825
Annualised cash passing rental income 62,835 59,012
Property outgoings (4,729) (5,255)
Annualised net rents (b) 58,106 53,757
Add: notional rent expiration of rent free periods or other lease incentives 1,526 3,737
Topped-up net annualised rent (c) 59,632 57,494
EPRA NIY b/a 5.3% 4.6%
EPRA topped-up NIY c/a 5.4% 4.9%
Other Information
2023 Annual Report and Consolidated Financial Statements | 91
4) EPRA Vacancy rate – EPRA vacancy rate is the estimated rental value (ERV) of vacant space excluding development properties
divided by the ERV of the whole property, expressed as a percentage.
2023
£’000
2022
£’000
Annualised potential rental value of vacant premises 4,635 3,940
Annualised potential rental value for the complete property portfolio 69,462 66,711
EPRA Vacancy rate 6.7% 5.9%
5) EPRA cost ratio – EPRA cost ratio reflects the overheads and operating costs as a percentage of the gross rental income.
2023
£’000
2022
£’000
Total expenditure per IFRS Income Statement 13,304 13,340
EPRA costs (including direct vacancy costs) (a) 13,304 13,340
Direct vacancy costs 2,561 1,709
EPRA costs (excluding direct vacancy costs) (b) 10,743 11,631
Gross Rental Income less ground rent costs per Income Statement (c) 60,625 59,497
EPRA cost ratio (including direct vacancy costs) a/c 21.9% 22.4%
EPRA cost ratio (excluding direct vacancy costs) b/c 17.7% 19.5%
No operating costs or overheads were capitalised in 2023 (2022: nil).
6) Capital expenditure
2023
£’000
2022
£’000
Acquisitions 460 387
Development 143 52
No incremental lettable space 7,654 3,930
Incremental lettable space 704 19,328
Total capital expenditure 8,961 23,697
The Company has no interests in joint ventures.
Other Information
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Financial Report
Headlines and
Performance Summary
92 | Balanced Commercial Property Trust Limited
Corporate Terms
AAF – Audit and Assurance Faculty guidance issued by the
Institute of Chartered Accountants in England and Wales.
AIC – Association of Investment Companies. This is the trade
body for Closed-end Investment Companies (theaic.co.uk).
AIFMD – The UK version of the Alternative Investment Fund
Managers Directive as it forms part of UK law pursuant to
the European Union (Withdrawal) Act 2018 as amended.
Issued by the European Parliament in 2012 and 2013, the
Directive requires that all investment vehicles in the European
Union, including Closed- end Investment Companies, must
have appointed a Depositary and an Alternative Investment
Fund Manager before 22 July 2014. The Board of Directors
of a Closed-end Investment Company, nevertheless, remains
fully responsible for all aspects of the company’s strategy,
operations and compliance with regulations.
Benchmark – This is a measure against which an Investment
Company’s performance is compared. The Company does not
have a formal Benchmark but does report its performance
against the MSCI UK Quarterly Property Index.
Closed-end Investment Company – A company with a fixed
issued ordinary share capital which is traded on an exchange
at a price not necessarily related to the Net Asset Value of the
company and where shares can only be issued or bought back
by the company in certain circumstances. This contrasts with
an open-ended investment company, which has units not traded
on an exchange but issued or bought back from investors at a
price directly related to the Net Asset Value.
Depositary – Under AIFMD rules applying from July 2014, the
Company must appoint a Depositary, whose duties in respect
of investments, cash and similar assets include: safekeeping;
verification of ownership and valuation; and cash monitoring.
Under AIFMD regulations, the Depositary has strict liability for
the loss of the Company’s financial assets in respect of which
it has safekeeping duties. The Depositary’s oversight duties
include, but are not limited to, oversight of share buybacks,
dividend payments and adherence to investment limits. The
Company’s Depositary is JP Morgan Europe Limited.
Dividend – The income from an investment. The Company
currently pays dividends to shareholders monthly.
GAAP – Generally Accepted Accounting Practice. This includes
UK GAAP and International GAAP (IFRS or International
Financial Reporting Standards applicable in the European
Union). The Company’s financial statements are prepared in
accordance with IFRS as adopted in the European Union.
Gearing – Unlike open-ended investment companies, Closed-
end Investment Companies have the ability to borrow to invest.
This term is used to describe the level of borrowings that an
Investment Company has undertaken. The higher the level of
borrowings, the higher the gearing ratio.
Leverage – As defined under AIFMD rules, leverage is any method
by which the exposure of an AIF is increased through borrowing of
cash or securities or leverage embedded in derivative positions.
Leverage is broadly equivalent to Gearing, but is expressed as
a ratio between the assets (excluding borrowings) and the net
assets (after taking account of borrowing). Under the gross
method, exposure represents the sum of the Company’s positions
after deduction of cash balances, without taking account of any
hedging or netting arrangements. Under the commitment method,
exposure is calculated without the deduction of cash balances
and after certain hedging and netting positions are offset against
each other.
Managers – The Company’s investment managers are
Columbia Threadneedle Investment Business Limited, and its
property managers are Columbia Threadneedle REP AM plc.
Further details are set out on page 95 and in note 3 to the
financial statements.
Market Capitalisation – The stock market value of a company
as determined by multiplying the number of shares in issue,
excluding those shares held in treasury, by the market price of
the shares.
Net Assets (or Shareholders’ Funds) – This is calculated as
the value of the investments and other assets of an Investment
Company, plus cash and trade and other receivables, less
borrowings and trade and other payables. It represents the
underlying value of an Investment Company at a point in time.
Net Asset Value (‘NAV’) per Ordinary Share – This is
calculated as the net assets of an Investment Company divided
by the number of shares in issue, excluding those shares held
in treasury.
Glossary of Terms
Other Information
2023 Annual Report and Consolidated Financial Statements | 93
REIT – Real Estate Investment Trust. A tax regime which in the
UK exempts participants from corporation tax both on UK rental
income and gains arising on UK investment property sales,
subject to certain requirements.
Ordinary Shares – The main type of equity capital issued by
conventional Investment Companies. Shareholders are entitled
to their share of both income, in the form of dividends paid
by the Investment Company, and any capital growth. As at
31 December 2023 the Company had only Ordinary Shares
in issue.
Share Price – The value of a share at a point in time as quoted
on a stock exchange. The Company’s Ordinary Shares are
quoted on the Main Market of the London Stock Exchange.
SORP – Statement of Recommended Practice “Financial
Statements of Investment Trust Companies and Venture Capital
Trusts” issued by the AIC.
Total Assets – This is calculated as the value of the
investments and other assets of an Investment Company, plus
cash and trade and other payables.
Property Terms
Break Option – A clause in a Lease which provides the landlord
or tenant with an ability to terminate the Lease before its
contractual expiry date.
Covenant Strength – This refers to the quality of a tenant’s
financial status and its ability to perform the covenants in
the Lease.
Dilapidation – Repairs required during or at the end of a
tenancy or lease.
Estimated Rental Value (‘ERV’) – The estimated annual market
rental value of a property as determined by the Company’s
External Valuer. This will normally be different from the actual
rent being paid.
External Valuer – An independent external valuer of a property.
The Company’s External Valuer is CBRE Limited and detailed
information regarding the valuation of the Company’s properties
is included in note 9 to the financial accounts.
Fixed and Minimum Uplift Rents – Rents subject to fixed
uplifts at an agreed level on agreed dates stipulated within
the Lease, or rents subject to contracted minimum uplifts at
specified review dates.
Lease – A legally binding contract between a landlord and
a tenant which sets out the basis on which the tenant is
permitted to occupy a property, including the Lease length.
Lease Incentive – A payment used to encourage a tenant to
take on a new Lease, for example by a landlord paying a tenant
a sum of money to contribute to the cost of a tenant’s fit-out of
a property or by allowing a rent free period.
Lease Re-gear – This term is used to describe the
renegotiation of a Lease during the term and is often linked
to another Lease event, for example a Break Option or
Rent Review.
Lease Renewal – The renegotiation of a Lease with the existing
Tenant at its contractual expiry.
Lease Surrender – An agreement whereby the landlord and
tenant bring a Lease to an end other than by contractual
expiry or the exercise of a Break Option. This will frequently
involve the negotiation of a surrender premium by one party to
the other.
Net Income – The net income from a property after deducting
ground rent and non-recoverable expenditure.
Net Initial Yield – The initial Net Income from a property at
the date of purchase, expressed as a percentage of the gross
purchase price including the costs of purchase.
Rent Review – A periodic review of rent during the term of a
Lease, as provided for within a Lease agreement.
Reversion – Increase in rent estimated by the Company’s
External Valuer, where the passing rent is below the ERV. The
increases to rent arise on rent reviews and lettings.
Tenant’s Improvements – This term is used to describe a wide
range of works that are usually carried out by a tenant, at its
own cost, and usually require the landlord’s prior approval.
Voids or Vacancy – The amount of rent relating to properties
which are unoccupied and generating no rental income. Stated
as a percentage of ERV.
Other Information
Governance Report Auditor's Report
Notice of AGM Other InformationStrategic Report
Financial Report
Headlines and
Performance Summary
94 | Balanced Commercial Property Trust Limited
Other Information
CT Individual Savings Account (ISA)
You can use your ISA allowance to make an annual tax efficient
investment of up to £20,000 for the current tax year with a
lump sum from £100 or regular savings from £25 a month.
You can also transfer any existing ISAs to us whilst maintaining
the tax benefits.
CT Junior Individual Savings Account (JISA)
*
A tax efficient way to invest up to £9,000 per tax year for
a child. Contributions start from £100 lump sum or £25 a
month. JISAs or CTFs with other providers can be transferred
to Columbia Threadneedle Investments.
CT Lifetime Individual Savings Account (LISA)
For those aged 18-39, a LISA could help towards purchasing
your first home or retirement in later life. Invest up to £4,000
for the current tax year and receive a 25% Government bonus
up to £1,000 per year. Invest with a lump sum from £100 or
regular savings from £25 a month.
CT General Investment Account (GIA)
This is a flexible way to invest in our range of Investment
Trusts. There are no maximum contributions, and investments
can be made from £100 lump sum or £25 a month.
CT Junior Investment Account (JIA)
This is a flexible way to save for a child in our range of
Investment Trusts. There are no maximum contributions, and
the plan can easily be set up under bare trust (where the child
is noted as the beneficial owner) or kept in your name if you
wish to retain control over the investment. Investments can be
made from a £100 lump sum or £25 a month per account. You
can also make additional lump sum top-ups at any time from
£100 per account.
CT Child Trust Fund (CTF)
*
If your child already has a CTF, you can invest up to £9,000 per
birthday year, from £100 lump sum or £25 a month. CTFs with
other providers can be transferred to Columbia Threadneedle
Investments.
* The CTF and JISA accounts are opened by parents in the child’s name
and they have access to the money at age 18. **Calls may be recorded
or monitored for training and quality purposes.
Charges
Annual management charges and other charges apply
according to the type of Savings Plan, these can be found on
the relevant product Pre- sales Cost & Charges disclosure on
our website www.ctinvest.co.uk.
Annual account charge
ISA/LISA: £60+VAT
GIA: £40+VAT
JISA/JIA/CTF: £25+VAT
You can pay the annual charge from your account, or by direct
debit (in addition to any annual subscription limits).
Dealing charges
£12 per fund (reduced to £0 for deals placed through the online
Columbia Threadneedle Investor Portal) for ISA/GIA/LISA/JIA and
JISA. There are no dealing charges on a CTF.
Dealing charges apply when shares are bought or sold but not
on the reinvestment of dividends or the investment of monthly
direct debits. Government stamp duty of 0.5% also applies on the
purchase of shares (where applicable).
The value of investments can go down as well as up and you may
not get back your original investment. Tax benefits depend on your
individual circumstances and tax allowances and rules may change.
Please ensure you have read the full Terms and Conditions, Privacy
Policy and relevant Key Features documents before investing. For
regulatory purposes, please ensure you have read the Pre-sales
Cost & Charges disclosure related to the product you are applying
for, and the relevant Key Information Documents (KIDs) for the
investment trusts you want to invest in, these can be found at
www.ctinvest.co.uk/documents.
How to Invest
To open a new Columbia Threadneedle Savings Plan,
apply online at www.ctinvest.co.uk. Online applications are
not available if you are transferring an existing Savings
Plan with another provider to Columbia Threadneedle
Investments, or if you are applying for a new Savings
Plan in more than one name but paper applications
are available at www.ctinvest.co.uk/documents or by
contacting Columbia Threadneedle Investments.
New Customers
Call: 0345 600 3030
**
(9.00am – 5.00pm, weekdays)
Email: invest@columbiathreadneedle.com
Existing Savings Plan Holders
Call: 0345 600 3030
**
(9.00am – 5.00pm, weekdays)
Email: investor.enquiries@columbiathreadneedle.com
By post: Columbia Threadneedle Management Limited, PO Box
11114, Chelmsford, CM99 2DG
You can also invest in the trust through online dealing
platforms for private investors that offer share dealing and
ISAs. Companies include: Barclays Stockbrokers, EQi, Halifax,
Hargreaves Lansdown, HSBC, Interactive Investor, Lloyds Bank,
The Share Centre
One of the most convenient ways to invest in Balanced Commercial Property Trust Limited is through one of the Savings
Plans run by Columbia Threadneedle Investments.
How to Invest
Capital at risk.
The material relates to an investment trust and its Ordinary Shares are traded on the main market of the London Stock Exchange.
The Investor Disclosure Document, Key Information Document (KID), latest annual or interim reports and the applicable terms & conditions are available from Columbia Threadneedle Investments Cannon Place, 78 Cannon Street, London
EC4N 6AG, your financial advisor and/or on our website www.columbiathreadneedle.com. Please read the Investor Disclosure Document before taking any investment decision.
This material should not be considered as an offer, solicitation, advice or an investment recommendation. This communication is valid at the date of publication and may be subject to change without notice. Information from external
sources is considered reliable but there is no guarantee as to its accuracy or completeness.
In the UK: Issued by Columbia Threadneedle Management Limited, No. 517895, registered in England and Wales and authorised and regulated in the UK by the Financial Conduct Authority.
© 2024 Columbia Threadneedle Investments. WF560250 (01/24) UK. Expiration Date: 31/01/2025
To find out more, visit www.ctinvest.co.uk
0345 600 3030, 9.00am – 5.00pm, weekdays, calls may be recorded or monitored for training and quality purposes.
Financial promotion
2023 Annual Report and Consolidated Financial Statements | 95
Other Information
Governance Report Auditor's Report
Notice of AGM Other InformationStrategic Report
Financial Report
Company Overview
The Company
company. Its shares have a premium listing on the Official List of the Financial Conduct Authority and are traded on the Main
Market of the London Stock Exchange. Stock Code : BCPT.
The Consolidated Financial Statements of the Company consolidate the results of its subsidiary undertakings, which collectively
are referred to throughout this document as ‘the Group’, details of which are contained in note 20 to the accounts.
Objective
Investment Policy
The Company’s investment policy is set out on page 6.
Management
The Board has appointed Columbia Threadneedle Investment Business Limited (referred to throughout this document as ‘the
Investment Managers’) as the Company’s investment managers and Columbia Threadneedle REP AM plc (referred to throughout
this document as ‘CT REP’ or ‘the Property Managers’) as the Company’s property managers. The Investment Managers and CT
REP are both part of the Columbia Threadneedle Investments Group (‘CTI’) and, collectively, are referred to in this document as
‘the Managers’.
Capital Structure
The Company’s equity capital structure consists of ordinary shares (‘Ordinary Shares’). Subject to the solvency test provided for in
The Companies (Guernsey) Law, 2008 being satisfied, ordinary shareholders are entitled to all dividends declared by the Company
and to all of the Company’s assets after repayment of its borrowings and ordinary creditors.
Guernsey Regulatory Status
The Company is an authorised closed-ended investment scheme domiciled in Guernsey and on 9 June 2009, was granted an
authorisation declaration by the Guernsey Financial Services Commission in accordance with Section 8 of The Protection of
Investors (Bailiwick of Guernsey) Law, 2020, and rule 6.2 of the Authorised Closed-Ended Investment Schemes Rules 2021.
How to Invest
The Investment Managers operate a number of investment plans which facilitate investment in the shares of the Company. Details
are contained on page 94. You may also invest through your usual stockbroker.
Visit our website at:
balancedcommercialproperty.co.uk
Registered in Guernsey with company registration number 50402
Legal Entity Identifier : 213800A2B1H4ULF3K397
The As
sociation of
Investment Companies
Headlines and
Performance Summary
96 | Balanced Commercial Property Trust Limited
Other Information
Corporate Information
Directors (all non-executive)
Paul Marcuse (Chairman)
*
Isobel Sharp
#‡
John Wythe
†
Linda Wilding
+
Karima Fahmy (appointed 19 January 2024)
Secretary
Northern Trust International Fund
Administration Services
(Guernsey) Limited
PO Box 255
Trafalgar Court
Les Banques
St. Peter Port
Guernsey
Channel Islands GY1 3QL
01481 745001
Alternative Investment Fund Manager (‘AIFM’)
and Investment Managers
Columbia Threadneedle Investment Business Limited
6th Floor
Quartermile 4
7a Nightingale Way
Edinburgh EH3 9EG
0207 628 8000
Property Managers
Columbia Threadneedle REP AM plc
Cannon Place
78 Cannon Street
London EC4N 6AG
Property Valuers
CBRE Limited
Henrietta House
Henrietta Place
London W1G 0NB
Independent Auditors
PricewaterhouseCoopers CI LLP
Royal Bank Place
1 Glategny Esplanade
St. Peter Port
Guernsey GY1 4ND
Guernsey Legal Advisers
Carey Olsen (Guernsey) LLP
Carey House
Les Banques
St. Peter Port
Guernsey GY1 4BZ
UK Legal Advisers
Dickson Minto WS
16 Charlotte Square
Edinburgh EH2 4DF
Brokers and Financial Advisers
Winterflood Securities Limited
Riverbank House
2 Swan Lane
London
EC4R 3GA
Barclays Bank PLC - UK
1 Churchill Place
London
E14 5HP
Depositary
JPMorgan Europe Limited
25 Bank Street
Canary Wharf
London E14 5JP
* Chairman of the Nomination Committee
#
Chairman of the Audit and Risk Committee
‡
Senior Independent Director
†
Chairman of the Management Engagement Committee
+
Chairman of the ESG Committee
Balanced Commercial Property Trust Limited
2023 Annual Report and Consolidated Financial Statements
Contact us
Registered office:
+44 1481 745001
Registrars:
Computershare Investor Services (Guernsey) Limited
c/o Queensway House, Hilgrove Street,
St. Helier, Jersey, Channel Islands JE1 1ES
General Company Enquiries:
BCPTEnquiries@columbiathreadneedle.com
To find out more visit columbiathreadneedle.com
© 2024 Columbia Threadneedle Investments. Columbia Threadneedle Investments is the global brand name of the Columbia and Threadneedle group of companies.