2022 ANNUAL REPORT AND
CONSOLIDATED FINANCIAL
STATEMENTS
Formerly BMO Commercial
Property Trust Limited
Balanced Commercial Property Trust Limited
Contents
Independent Auditor’s Report 43
Financial Report
Consolidated Statement of Comprehensive Income 49
Consolidated Balance Sheet 50
Consolidated Statement of Changes in Equity 51
Consolidated Statement of Cash Flows 52
Notes to the Consolidated Financial Statements 53
AIFM Disclosure 71
Notice of Annual General Meeting 72
Other Information
Shareholder Information 75
Historic Record 76
Alternative Performance Measures 77
EPRA Performance Measures 79
Glossary of Terms 82
How to Invest 84
Corporate Information 85
Overview
Company Overview 1
Headlines 2
Performance Summary 3
Strategic Report
Chairman’s Statement 5
Business Model and Strategy 7
Promoting the Success of the Company 9
Key Performance Indicators 11
Principal Risks and Future Prospects 12
Managers’ Review 15
Property Portfolio 22
Environmental, Social and Governance (ESG) 23
Spotlight: big strides, small steps 27
Governance Report
Directors 30
Directors’ Report 31
Corporate Governance Statement 35
Report of the Audit and Risk Committee 38
Directors’ Remuneration Report 40
Statement of Directors’ Responsibilities 42
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 Photo: Liverpool, Hurricane 52, Estuary Business Park
Strategic Report
Strategic Report Governance Report Financial Report AGM
Other Information
Chairman’s statementOverview Auditors’ Report
Company Overview
The Company
Balanced Commercial Property Trust Limited (“the Company”) formerly known as BMO Commercial Property Trust Limited, is an authorised
closed-ended Guernsey
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.
At 31 December 2022 Group total assets less current liabilities were £1,093 million and Group shareholders’ funds were £831 million.
Objective
Investment Policy
The Company’s investment policy is set out on page 7.
Management
The Board has appointed Columbia Threadneedle Investment Business Limited (previously BMO Investment Business Limited) (referred to
throughout this document as ‘the Investment Managers’) as the Company’s investment managers and Columbia Threadneedle REP AM plc
(previously BMO REP Asset Management 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 84. You may also invest through your usual stockbroker.
Alternative Performance Measures (‘APM’)
The Company uses a number of alternative performance measures in the discussion of its business performance and financial position. Further
information is provided on pages 77 and 78.
Visit our website at:
balancedcommercialproperty.co.uk
Registered in Guernsey with company registration number 50402
Legal Entity Identifier : 213800A2B1H4ULF3K397
2022 Annual Report and Consolidated Financial Statements | 1
Overview
Overview Strategic Report Governance Report Auditor’s Report Financial Report Notice of AGM Other Information
Headlines
2 | Balanced Commercial Property Trust Limited
Overview
Share price total return
-11.7%
*
Portfolio total return
-6.5%
*
Dividend cover on a cash basis. Accounting dividend cover was 102.3 per cent
104.8%
*
Void rate
As at 31 December 2022, the void rate was 5.9 per cent, excluding property being developed or
refurbished, which compares to a rate of 2.0 per cent at the start of the calendar year. The void rate
was 1.4 per cent excluding the asset at Stockley Park, Uxbridge where redevelopment opportunities
are being actively reviewed.
Carbon Emissions
Reduction in absolute carbon emissions of 26 per cent since 2021.
Rent Collection
Rent collection has stabilised at pre-pandemic levels with collection of 99 per cent for the year
ended 31 December 2022.
5.9%
26%
99%
Dividend increase during the year
10.6%
* See Alternative Performance Measures on pages 77 and 78.
Dividend yield on year-end share price
5.3%
*
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.
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Chairman’s statementOverview Auditors’ Report
2022 Annual Report and Consolidated Financial Statements | 3
Overview
Year ended
31 December
2022
Year ended
31 December
2021
Year ended
31 December
2022
Year ended
31 December
2021
Net asset value per share -9.2% 18.9%
Ordinary Share price -11.7% 37.8%
Portfolio -6.5% 15.5%
MSCI UK Quarterly Property Index -8.9% 16.3%
FTSE All-Share Index 0.3% 18.3%
Year ended
31 December
2022
Year ended
31 December
2021
Earnings per Ordinary Share (13.1)p 19.8p
EPRA Earnings per Ordinary Share** 4.8p 4.4p
Dividends per Ordinary Share 4.70p 4.25p
Dividend yield* 5.3% 4.1%
As a percentage of average net assets (including direct property expenses)* 1.39% 1.31%
As a percentage of average net assets (excluding direct property expenses)* 0.86% 0.90%
Year ended
31 December
2022
Year ended
31 December
2021 % change
Total assets less current liabilities (£’000) 1,093,103 1,328,577 -17.7%
Net asset value per share 118.5p 135.1p -12.3%
EPRA Net Tangible Assets per share** 118.4p 135.1p -12.4%
Ordinary Share price 88.5p 105.0p -15.7%
FTSE All-Share Index 4,075.1 4,208.0 -3.2%
Ordinary share price discount to net asset value per share* (25.3)% (22.3)% -3.0%
Net Gearing* 23.4% 14.4% +9.0%
Performance Summary
* See Alternative Performance Measures on pages 77 and 78.
** See EPRA Performance Measures on pages 79 to 81.
Total Returns for the year*
Capital Values
Earnings and Dividends
Ongoing Charges
Overview Strategic Report Governance Report Auditor’s Report Financial Report Notice of AGM Other Information
Overview
4 | Balanced Commercial Property Trust Limited
* See Alternative Performance Measures on pages 77 and 78.
Sources: Columbia Threadneedle Investment Business, MSCI Inc and Refinitiv Eikon.
1
based on year-end share price.
Since launch in 2005 Balanced Commercial Property Trust Limited has turned a £1,000 investment, with
dividends reinvested*, into £2,217
1
.
Net asset value per share at 31 December of 118.5 pence
(12.3% decrease from 2021)
Share price discount to net asset value at 31 December of 25.3% *
Ordinary share price per share at 31 December of 88.5 pence
(15.7% decrease from 2021)
Ongoing charges 1.39% (including direct property expenses) *
Source: Columbia Threadneedle REP AM plc
Source: Columbia Threadneedle REP AM plc
Source: Columbia Threadneedle REP AM plc
Source: Columbia Threadneedle REP AM plc
160p
140p
120p
100p
80p
60p
40p
20p
0p
2018 2019 2020 2021 20222013 2015 2016 20172014
15%
10%
0%
5%
-5%
-10%
-20%
-30%
-15%
-25%
-35%
2018 2019 2020 2021 20222013 2015 2016 20172014
160p
140p
120p
100p
80p
60p
40p
20p
0p
2019
2020
2021
2022
2013 2015 2016 2017 20182014
2.00%
1.75%
1.50%
1.25%
1.00%
0.75%
0.50%
0.25%
0%
2018 2019 2020 2021 20222013 2015 2016 20172014
Year’s Highs/Lows
Highs 2022 Lows 2022
Net asset value per share 148.6p 118.5p
Ordinary Share price 122.6p 72.1p
Ordinary share price discount to net asset value per share -13.4% -50.3%
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Chairman’s statementOverview Auditors’ Report
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2022 Annual Report and Consolidated Financial Statements | 5
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Overview Auditor’s Report
The second half of 2022 saw a marked reversal of the positivity
seen in the early part of the year. As the year progressed,
geopolitical challenges and inflationary pressures resulted in rising
interest rates and slowing economic growth. This had an inevitable
impact on consumer confidence and economic activity.
September’s mini budget marked a distinct turning point and proved
the catalyst for one of the worst quarters of capital performance
from the UK commercial real estate market on record. A significant
increase in gilt yields compounded the sustained tightening of
monetary policy and precipitated a rapid pricing correction across
the real estate sub-markets. October 2022 saw the largest monthly
decline in capital value on record (as measured by the MSCI Monthly
index), closely followed by November 2022 as the second, as the
investment market was marred by uncertainty and illiquidity that have
spilled over into the beginning of 2023.
The capital value declines were particularly marked in the industrial
and logistics sector and the retail warehousing sector. These sectors
had experienced the highest levels of yield compression in the first
half of the year and had performed strongly in recent years.
Company Performance
Against this challenging economic backdrop, the Company has
delivered a net asset value (‘NAV’) total return of -9.2 per cent and
the NAV per share as at 31 December 2022 was 118.5 pence, down
from 135.1 pence per share as at 31 December 2021 (a decrease of
12.3 per cent).
The potential downside risk attached to real estate asset values has
been reflected in share prices and share price volatility within the
sector. At the year-end the discount was 25.3 per cent, compared
to 22.3 per cent at 31 December 2021. The share price total return
for the year was -11.7 per cent. The share price discount remains
a major frustration and a reflection of the challenges that the real
estate sector has been facing, exacerbated by the rising interest rate
environment. Against this market background the Board will continue
to consider value-enhancing strategic opportunities, alongside
supporting the Managers in investments and significant asset
management initiatives at portfolio level.
Pence
per share*
NAV per share as at 31 December 2021 135.1
Unrealised decrease in valuation of property
portfolio
(17.9)
Share buybacks 1.1
Movement in fair value of interest rate swap 0.1
Other net revenue 4.8
Dividends paid (4.7)
NAV per share as at 31 December 2022 118.5
Portfolio Performance
The Company’s portfolio delivered a total return of -6.5 per cent
over the 12-month reporting period, outperforming the MSCI UK
Quarterly Property Index (‘MSCI’ or ‘Index’) return of -8.9 per cent.
Outperformance was driven by a capital return of -10.5 per cent
against the Index return of -12.4 per cent and an income return of
4.5 per cent against the Index at 4.0 per cent.
The balanced nature of the portfolio has proven to be a structural
benefit and the Managers have executed a number of accretive
asset management activities to deliver both capital and income
outperformance over the year. More detail on these activities is
provided in the Managers’ Review.
The performance of the largest asset within the portfolio, the mixed-
use holding at St Christopher’s Place in London, has been particularly
notable. Having endured a challenging period since the on-set of the
Covid pandemic, it has been the top performing asset over the 12
months.
The Company has identified a number of assets as potential disposal
targets as part of a capital recycling strategy, primarily focussing on a
down-weighting of the portfolio’s office exposure. However, any future
disposals are to be executed within a supportive market context
and the Company will continue to review its investment strategy as
market conditions evolve.
Borrowings and Cash
The Company has maintained a liquid position over the period
and as at 31 December 2022, the Company had £54.8 million of
available cash.
There is a £260 million term loan in place with L&G which matures
in December 2024 and the Board has engaged debt advisors to
consider the financing options available at this early stage. The
Company believes that there is lender appetite for this type of debt
based on advice received and we are closely monitoring the financial
markets as we move closer to the refinancing date.
The Company also has a £50 million term loan with Barclays, along
with an additional undrawn £50 million revolving credit facility. The
Barclays facility expires on 31 July 2024, with the Company having
taken up the option earlier this month of a one-year extension. As at
31 December 2022, the Company’s loan to value, net of cash (‘LTV’),
was 23.4 per cent and the weighted average interest rate on the
Group’s total current borrowings was 3.6 per cent.
Continuation Vote
As set out in the Articles of Incorporation, the Directors shall put an
ordinary resolution to shareholders in relation to the continuation
of the Company at a general meeting which has to be held in 2024.
We will be consulting with shareholders later this year as part of this
process and will advise on a date for the meeting in due course.
Paul Marcuse, Chairman
Chairman’s Statement
Overview Strategic Report Governance Report Auditor’s Report Financial Report Notice of AGM Other Information
* Based on the average number of shares in issue during the year
Share Buybacks
The Company has continued share buybacks during the year, using
some of the proceeds from property sales in 2021. The Company
purchased 51.6 million shares during the year at an average
discount at the time of purchase of 19.6 per cent and a cost of
£58.5 million. This has enhanced the NAV by 1.1 pence per share
during the year while providing additional liquidity in the Company’s
shares.
The buybacks were transacted between January and September
2022 but have subsequently been put on hold, with the preservation
of cash in current markets taking precedence.
Dividends
The Company paid twelve interim dividends totalling 4.7 pence
per share during the year, a 10.6 per cent increase on the prior
year. There were four monthly dividends of 0.375 pence per share,
followed by an increase in May 2022 to 0.4 pence per share.
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.
Board Composition
Having served on the Company’s Board for 9 years, Trudi Clark
will retire from her role as non-executive director and Chairman of
the Audit and Risk Committee with effect from the Annual General
Meeting in May 2023. I would like to thank Trudi for the considerable
contribution she has made during her time on the Board.
I am delighted to confirm that Isobel Sharp, who has been actively
involved on the Board since her appointment as non-executive
Director in November 2022, will assume Trudi’s duties as Audit
and Risk Committee Chairman when she steps down. Isobel has
extensive accounting, auditing and corporate governance experience.
She was with Deloitte LLP as the firm’s Senior Technical Partner
until 2012, 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.
Environmental, Social and Governance (‘ESG’)
The ESG agenda continues to gather pace and the Board, alongside
our Managers, maintain a commitment to high standards and best
practice. The Company has a Global Real Estate Sustainability
Benchmark ("GRESB") rating of 70, giving it a two-star green
rating, as well as a gold standard EPRA award for disclosure. The
Company’s 2022 ESG report is due to be published in April 2023,
and our strategy is continually developing along with the swift
evolution of the ESG landscape. The ESG section of this report
serves as an update on our progress as we look to position the
Company and portfolio for long-term resilience.
The key focus for the Company in 2023 is the refinement of our Net
Zero Carbon pathway. Independent Net Zero Carbon assessments
were completed for all of the Company’s properties, mapping the
interventions necessary to meet our commitment to deliver net zero
by 2040 or earlier. Asset-level pathway modelling is now underway
and will underpin a refined portfolio strategy in the coming months.
However, we are making considerable inroads into pathway delivery
with a significant number of interventions already in progress,
particularly relating to the generation of renewable energy through
solar panel installations.
Our Net Zero Carbon pathway offers clear synergies with the
futureproofing of the portfolio to meet the requirements of the
Strategic Report
6 | Balanced Commercial Property Trust Limited
Minimum Energy Efficiency Standards ("MEES"). All portfolio assets
have now been assessed to enable us to develop a portfolio strategy
to meet the hardening of thresholds under MEES, which we will refine
alongside our Net Zero Carbon pathway.
Outlook
The Bank of England has continued to raise interest rates in
response to persistent inflationary pressures and economic output
has remained muted. However, the labour market remains tight,
inflation is slowing as energy costs abate and global supply chain
pressures are easing. The Bank of England is still anticipating a fall
in GDP throughout the rest of 2023 and into Q1 2024, although not
at the levels previously forecast.
Across the real estate sectors, occupational markets have generally
been more robust than might have been expected, and investment
market activity at least in some sectors has rebounded in the early
stages of 2023. A short period of negative economic growth would
limit the impact on the occupational markets and on this basis, we
are hopeful that the UK real estate sector will begin to see a recovery
in the second half of 2023, particularly if there is not sustained
tightening in the credit markets.
In the meantime, income is expected to be the primary driver of total
returns and remains a key focus of Company strategy. Following the
disposal of ex-growth properties in 2021, the portfolio is delivering
a steady income during uncertain markets, with strong reversionary
potential. The Managers believe there to be significant latent value
within the portfolio to unlock through accretive redevelopment,
securing key leasing initiatives, repositioning assets and making ESG-
led investment.
Our ability to deliver these initiatives is supported by the quality of
our underlying asset base. The resilience of a balanced, diversified
portfolio provides comfort in less certain markets craving a return of
greater stability and confidence.
Paul Marcuse
Chairman
18 April 2023
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.
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2022 Annual Report and Consolidated Financial Statements | 7
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Overview Auditor’s Report
Business Model and Strategy
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
42, 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 30. 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 current investment policy was approved by shareholders at
the last AGM on 27 May 2022. Prior to this date, the maximum
weightings applied to the principal property sectors at any time were
(stated as a percentage of total assets): office: 50 per cent; retail:
65 per cent; and industrial: 40 per cent. 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 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 2022 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.
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.
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.
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8 | Balanced Commercial Property Trust Limited
Strategic Report
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 shall put an
ordinary resolution to shareholders in relation to the continuation
of the Company, in its then form, at a General Meeting to be held 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.
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
Liverpool Hurricane 47, Estuary Business Park
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 to date has
purchased 97.8 million shares at an average discount at the time of
purchase of 20.8 per cent and a cost of £103.7 million. This policy
has enhanced the NAV by 1.1 pence per share during the year and
has provided additional liquidity in the Company’s shares. 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 Value
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 84. In addition, meetings are held regularly
with current and prospective shareholders and stockbroking analysts
covering the investment company sector. Communication of quarterly
portfolio information is made through the Company’s website.
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Chairman’s statementOverview Auditors’ Report
2022 Annual Report and Consolidated Financial Statements | 9
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Overview Auditor’s Report
Promoting the Success of the Company
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 broker, 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 two lenders to ensure that they
have a strong working relationship. Compliance with the borrowing
restrictions is monitored on an ongoing basis. The Company
has recently exercised a one-year extension option on the £100
million Barclays facility and discussions have commenced on
refinancing options with both loans due to expire in 2024.
The Managers work closely with our tenants, 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 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 broker.
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 26 additional information on
our approach towards Environmental, Social and Governance
('ESG'). Directors engage on this with the Managers and the
Company’s specialist ESG adviser, Hillbreak Limited to establish
an approach that is bespoke to the Company, business model and
portfolio. This has evolved in recent years and has involved the
determination of a suite of ESG pillars, commitments and targets
that are bespoke to the Company and its portfolio of property
assets. 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:
Investment policy
The Board, together with its Investment Managers, undertook a
review of the Company's investment policy in the light of the: (i)
current trends within the UK's commercial property market; and (ii)
the strategic direction that the Company had been moving in over
the previous year which had resulted in the Company's portfolio
exposure to industrials increasing to in excess of 30 per cent.
Whilst the Company's previous investment policy allowed investment
in the industrial sector of up to 40 per cent of total assets, the
Board was of the view that this had become unduly restrictive, and
the Investment Manager believed that having the requirement to
carry out a re-balancing exercise to retain the weighting could be
detrimental to the Company.
The Board also recognised that the Company may wish to increase
its exposure to other property sectors which had been traditionally
viewed as alternative property assets and which the previous
investment policy was silent on. The Board was of the view that the
previous maximum weightings had become unduly restrictive and
proposed that all sector weighting limits were removed from the
policy.
Shareholders were consulted on this change to the investment policy
via a circular and it was approved at the AGM on 27 May 2022.
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 0.4 pence per share in May 2022. This represented an increase
of 6.7 per cent compared to the prior monthly dividends and the
dividends paid for the year were 10.6 per cent higher than in 2021.
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.
Share issuance and buy-backs
The Board believes that the ability to issue and buy back shares is
in the interests of all shareholders as it helps to reduce the volatility
in the premium or discount of the Company’s share price relative
to the NAV. The Company has bought back 51.6 million shares
during the year at an average discount to the NAV at the time of
purchase of 19.6 per cent and a cost of £58.5 million. The 51.6
million ordinary shares bought back with a nominal value of 1 pence
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10 | Balanced Commercial Property Trust Limited
Strategic Report
each represented 6.4 per cent of the shares in issue (exclusive of
any shares held in treasury) as at 31 December 2022. This has
helped to enhance the NAV for ongoing shareholders by 1.1 pence
per share for the year and has provided liquidity in the Company’s
shares.
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.
Tenants
It has been an extremely challenging three years following
the Covid outbreak and this, compounded by the more recent
inflationary environment and interest rate increases, has placed
financial stress on some of our tenants, particularly in the retail
space. The Managers have worked closely with tenants over this
period and have agreed to some concessions where it has been
evident that tenants have been experiencing financial challenges.
These negotiations have helped to assist with the ongoing viability
of many tenants, also ensuring that the Company has minimised
the costs associated with properties being vacant.
As long-term investors we always 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 balanced, high quality and sustainable portfolio.
Newbury Retail Park
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Newbury Retail Park
Key Performance Indicators
Performance total return*
1 Year
%
3 Years
%
5 Years
%
10 Years
%
Ordinary share price
(11.7) (12.9) (18.6) 34.8
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’)
(9.2) (0.8) 0.2 82.6
Portfolio return
(6.5) 2.8 6.9 91.4
MSCI UK Quarterly Property Index
(8.9) 3.9 11.7 89.0
FTSE All-Share Index
0.3 7.1 15.5 88.2
Income return*
1 Year
%
3 Years
%
5 Years
%
10 Years
%
Portfolio income return 4.5 14.9 25.0 57.5
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 4.0 13.3 23.7 58.1
Share price discount to NAV per share*
As at: 31 Dec
2022
%
31 Dec
2021
%
31 Dec
2020
%
31 Dec
2019
%
31 Dec
2018
%
Discount (25.3) (22.3) (31.9) (11.7) (10.9)
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
2022
%
31 Dec
2021
%
31 Dec
2020
%
31 Dec
2019
%
31 Dec
2018
%
Ongoing charges* 1.39 1.31 1.13 1.19 1.18
This data shows whether the Company is being run economically. It
measures the running costs as a percentage of the average net assets.
Ongoing charges
excluding direct property
expenses*
0.86 0.90 0.85 0.83 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.
Environmental performance
2022 2021 2020 2019 2018
Carbon emissions
(Scope 1 & 2) (tonnes
CO
2
e)
1,437 2,035 1,780 2,133 2,516
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.
Proportion of demises
with EPC ratings of A or
B (%)
16 16 12 12 10
This provides an indication of the level of exposure to higher theoretical
energy efficiency attributes of the property assets.
Social performance
2022 2021 2020 2019 2018
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 77 and 78.
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.
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12 | Balanced Commercial Property Trust Limited
Strategic Report
Principal Risks and Future Prospects
As stated within the Report of the Audit and Risk Committee on
pages 38 and 39, 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 a turbulent year, the catalyst for which was the war in
Ukraine which led to a global energy and cost of living crisis and
rising inflation in excess of 10 per cent in the UK. The Bank of
England has raised interest rates a number of times and at the
time of writing they are at 4.25 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 5
and 6 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 page 13 and in note 17, which provides
detailed explanations of the risks associated with the Company’s
financial instruments.
The Board seeks to mitigate and manage these risks and
uncertainties through continual review, policy-setting and
enforcement of contractual obligations, as well as a review by the
Audit and Risk Committee of the Internal Control reports prepared
in accordance with 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 mitigate
the portfolio risks through active asset management initiatives
and carrying out due diligence work on potential tenants before
entering into any new lease agreements. All of the properties in
the portfolio are insured.
As well as considering current risks quarterly, the 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. However, the Board considers that
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 uncertainties leading to inflation
and interest rate increases. This has been compounded by
the military invasion of Ukraine by Russia which is clearly a
humanitarian tragedy and is having widespread economic
consequences. From a macro-economic perspective, higher
medium-term oil, gas and food prices alongside financial
market disruption and sanctions on Russia has put upward
pressure on inflation and is suppressing economic growth.
There remains a risk of further interest rate increases.
Against this background, real estate valuations experienced
a significant pricing correction in the second half of 2022 as
the risk premium for investing in property adjusted to reflect
a higher interest rate environment.
• Interest rates have increased from 0.25 per cent to 4.25
per cent in just over a year. The Company is currently looking
at refinancing its debt with both facilities due to mature in
2024. The likelihood is that any new debt arrangements
will be more expensive than the current debt and the terms
of any future debt arrangement are under active review,
alongside the appropriate level of gearing.
• The ESG agenda is a very prominent one and will continue
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 26, we have already made
significant strides 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 than has
been the case previously. 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. Appetite for offices appears to be
finding some equilibrium with 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 will be essential. This will be at the
expense of lower quality stock and the emergence of a two-
tier market is already in evidence with the rebasing of both
capital values and rents. This is still evolving and continues
to be monitored.
• 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 our 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.
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.
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Highest Risks Mitigation Actions taken in the year
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.
Economic backdrop of inflationary pressures
and increasing interest rates.
An illiquid investment market with a significant
negative pricing adjustment in the second half
of 2022.
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 Managers in-house ESG team
continually monitor regulatory
background and best practice
standards, while the overall quality
of the portfolio provides some
protection against this.
The Board reviews the Managers' performance at quarterly
Board meetings against key performance indicators as set
out on page 11.
Significant lettings achieved, particularly in the industrial
portfolio and the retail parks, at increased rents helping
performance during a period of falling valuations.
The practical completion of development fundings on two
industrial assets with high ESG specifications has removed
a substantial element of development risk from the portfolio.
All portfolio assets have been subject to net zero carbon
assessments and MEES building reports to enable the
modelling of a pathway to compliance. A number of ESG
initiatives have been progressed over the year, most notably
the progression of solar PV schemes across the industrial
portfolio.
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 has widened during the year
as interest rates increased and sentiment
reduced.
Increased in the year under review
The discount is reported to and
reviewed by the Board at least
quarterly. 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.
The position is monitored by the
Managers’ and Broker on a daily
basis and any material changes are
investigated and communicated to
the Board.
Investors have access to the Managers and the underlying
team who will respond to any queries they have on the
discount. The level of discount is kept under constant review
and the Company conducted share buybacks during the year
to help manage this.
The Broker and the Managers’ sales team liaise with current
and prospective investors to try and generate demand for
the Company’s shares.
Financial Management Risk
Risk of financial or reputational damage due to
a failure to appropriately manage financial risk.
This includes management of cash resources
and debt.
The company’s principal £260 million debt
facility expires on 31 December 2024 and the
£100 million facility with Barclays expires in
July 2024. New finance will have to be put in
place against a backdrop of higher interest
rates.
Increased in the year under review
T
he level of cash is continually
monitored by the Managers. A
financial model is maintained, which
includes a 5-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 strategy for the refinancing of
debt is under active consideration.
The Company has paused share buybacks since September
2022, with the preservation of cash taking precedence in
current markets.
The Company elected to use a one-year extension option
of its £100 million facility with Barclays, which was due to
expire in July 2023. This has been extended to July 2024.
The Company has been reviewing its options on longer term
debt and believes that, based on advice received and current
market conditions there is lender appetite for refinancing the
Company's debt. Since the year end the Board has engaged
debt advisors to consider the financing options available in
order to formulate a long term debt strategy in terms of cost
and the appropriate level of gearing.
Product Strategy Risk
Risk that the Product Strategy (including
investment guidelines and policies) lacks
sustainability or is not relevant.
Risk that the strategy is not clearly defined/
articulated or directed to the correct target
audience.
ESG related initiatives are a core part of the
long-term strategy.
Unchanged in the year under review
The underlying investment strategy
is kept under constant appraisal
and the Board will have a strategy
session annually, in conjunction with
the Managers.
The strategy of having a balanced portfolio has aided
performance in a declining market with the significant retail
investment at St Christopher’s Place outperforming the wider
real estate market.
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.
Significant ongoing work on the Company’s ESG strategy
including the collection of relevant ESG data and the
formation on individual asset plans.
ESG enhancements performed on some of the Company’s
assets where opportunities have arisen.
The highest risks encountered during the year, how they are mitigated, and actions taken to address these are set out in the table below.
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14 | Balanced Commercial Property Trust Limited
Strategic Report
Viability Assessment and Statement
The Board conducted this review over a five-year time horizon, a period thought to be appropriate for a Group investing in commercial
property with a long-term investment outlook and with an average unexpired lease length of 5.2 years. The Group has its principal
borrowings with L&G secured until 31 December 2024 and is also subject to a continuation vote which will take place by the end of
2024.
Preparations with regards to the continuation vote will commence this year. The Viability Statement has been prepared on the
assumption that the Board recommends continuation and that shareholders approve the Board’s recommendation. The assessment
also takes into account the principal risks and uncertainties faced by the Group, 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 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 in 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 dramatic repricing of property valuations with the sector experiencing capital falls of 17.2 per cent
over the six months to 31 December 2022, as measured by the MSCI UK Quarterly Property Index (‘MSCI’).
A stress test was conducted over the five-year period to April 2028. Taking into account that the portfolio has already experienced a
significant valuation adjustment in the last two quarters, the modelling used a foreseeable severe but plausible scenario which took
into account the illiquid nature of the Group’s property portfolio, further significant future falls in the investment property values, the
continuation of the long-term borrowing facility and substantial falls in property income receipts.
The viability assessment modelling used the following assumptions:
•
We have modelled using the most negative of all property capital returns as measured by MSCI over one to five years using historic data
that goes back to 1985, with capital values falling by as much as 36.5 per cent. This takes into account that the property market has
already experienced capital falls of 17.2 per cent since June 2022.
• Debt refinanced at 1 per cent above the current long-term debt forecasts.
• 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.
• Dividends are maintained at current levels.
• £2 million per annum on ESG related capital expenditure.
The results of this modelling were as follows:
NAV Dividend Cover LTV (Net)
2024 89.5p 79.0% 30.0%
2025 79.8p 62.7% 33.7%
2026 81.2p 79.0% 34.0%
2027 86.3p 75.4% 33.5%
2028 87.6p 102.9% 33.1%
Even under this extreme scenario the Group remains viable with loan covenant tests passed and the current dividend rate maintained.
The level of the NAV remains positive under this extreme scenario. The Group 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 dividend 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 Group's £260 million long-term debt with L&G does not need to be refinanced until 31 December 2024. We calculate that the
market value of the properties secured under this loan would have to drop by a further 25 per cent from 31 December 2022 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 65 per cent. We are comfortable that these covenants will continue to be met.
The Group’s £50 million loan facility and £50 million revolving credit facility with Barclays is due to expire in July 2024. We calculate
that the market value of the properties secured under this loan would have to drop by 66 per cent before breaching the LTV test on the
facility. The loan interest cover test would only be breached by a fall in rental income of 48 per cent. We are comfortable that these
covenants will continue to be met.
The Group has a further £95 million of properties which are not secured against any lender and could be transferred to L&G or
Barclays to support covenant tests if required.
The Company believes that based on advice received and current market conditions there is lender appetite for refinancing the
Company's debt and that it will be able to satisfactorily refinance existing debt well in advance of the repayment dates.
Based on this assessment, and in the context of the Group’s business model, strategy and operational arrangements set out above,
the Directors have a reasonable expectation that the Group will be able to continue in operation and meet its liabilities as they fall due
over the five-year period to April 2028. For this reason, the Board also considers it appropriate to continue adopting the going concern
basis in preparing the Annual Report and Consolidated Financial Statements as disclosed in the Directors’ Report on page 33.
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Property headlines over the year
• A portfolio total return of -6.5* per cent over the 12 months to December 2022 versus the MSCI
UK Quarterly Property Index ('MSCI') return of -8.9 per cent.
• Sector allocations have been critical in delivering relative long-term outperformance, underlining
the value of a balanced portfolio.
• The portfolio’s largest holding, St Christopher’s Place in Central London continues its recovery
phase and has been a key driver of performance over the 12 months.
• Asset management activity delivered in the period has been accretive to both income and capital
performance, underlining strong asset fundamentals, attractive sector exposures and significant
latent income reversion within the portfolio.
• As at 31 December 2022, the void rate was 5.9 per cent, significantly below the MSCI Index at
8.0 per cent. The void rate is 1.4 per cent excluding the asset at Stockley Park, Uxbridge, where
redevelopment opportunities are being actively reviewed.
• Rent collection has stabilised at pre-pandemic levels with collection of 99 per cent for the year.
• Development fundings totalling £25.7m enhancing the Company’s exposure to the Industrial
sector, which retains strong growth prospects.
* See Alternative Performance Measures on pages 77 and 78.
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
Property Managers
The Company’s investment managers, Columbia Threadneedle Investment Business Limited (formerly BMO Investment Business Limited)
and asset and property manager, Columbia Threadneedle REP AM plc (formerly BMO REP Asset Management plc) a subsidiary of Columbia
Threadneedle Real Estate Partners LLP (formerly BMO Real Estate Partners LLP), and collectively, are referred to in this document as ‘the
Manager’. 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 £7.1 billion of real estate assets (December
2022), employing over 140 staff. 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. The fund management
team and sector heads have on average over 18 years of industry experience each. Columbia Threadneedle Real Estate Partners
undertakes fund and asset management services, property accounting and project management (where appropriate).
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
At the time of the Interim Report in June, inflationary headwinds
were mounting against the UK economy. The second half of 2022
was marked by a period of illiquidity and pricing discovery amidst
a rapid repricing of the UK commercial real estate market, which
saw equivalent yields at the all property level move out by 84 basis
points in the final quarter. This challenged backdrop has resulted
in the MSCI UK Quarterly Property Index generating a total return
of -8.9 per cent over the year, driven by capital decline of -12.4 per
cent.
The inflationary environment has resulted in ten consecutive
increases to the base rate, which has risen from 0.25 per cent to
4.25 per cent since the start of 2022. Wider yield expansion put
downward pressure on real estate values and was compounded by
September’s mini budget, which saw gilt yields rise rapidly. Mounting
headwinds of higher interest rates, a weaker economic backdrop and
volatility in the financial markets resulted in the rapid repricing of
real estate and marked investor caution. In the month of October, UK
real estate experienced its sharpest monthly value decline on record,
amid a subdued investment market alongside examples of forced
selling of real estate spurred by the need to satisfy redemption
and reweighting pressures in the wake of the LDI crisis. Overall
investment volumes in H2 2022 were down 40 per cent against H1
2022 and down 45 per cent year-on-year
1
.
However, the current price correction that continues to unfold in
the early stages of 2023 is not expected to remain entrenched. An
increased level of transactional activity was notable in December
2022 and this cautious optimism continues into 2023. Tentative
investor confidence is predicated on occupational markets that for
the meantime remain highly active and continue to show resilience
despite the wider economic pressures. Over the year, the MSCI Index
reported an income return of 4.0 per cent, slightly below long-term
average. Provided that any potential future period of negative growth
is limited, occupational markets are expected to remain robust,
assisted by a muted development pipeline constrained by rising
construction and debt costs that will keep levels of supply in check.
This supply-demand imbalance has been particularly prevalent
in the industrial and logistics sector, which generated rental
growth in excess of 10 per cent
2
in the 12 months to December
2022. Take up levels for 2022 were the third strongest on record,
despite declining in the second half of the year. Rental growth is
expected to moderate as occupier margins come under pressure,
although remains a key feature of the sector. The sector’s vacancy
rate remains at near historic lows of circa 4 per cent
3
and a wide
occupier base continues to support strong levels of demand,
principally driven by e-commerce, the push for supply chain
resilience and increasing on- and near-shoring. The sustained yield
compression the sector has experienced in recent years left it
exposed to the inflationary environment. Prime yields moved out by
as much as 150 basis points in the 6 months to December, leaving
yields at levels last seen in 2018. Over the year, the sector saw a
total return of -14.4 per cent.
The retail warehousing sector has followed a similar trajectory
as the rapid yield compression witnessed in 2021 and H1 2022
was reversed in the latter stages of 2022, as prime yields moved
out by 100-125 basis points. This resulted in the sector seeing
capital declines of -6.4 per cent over the year, in turn generating
a total return of -1.0 per cent. While the sector has been subject
to a market-led yield correction, strong fundamentals remain in
the form of a robust occupier pool, the critical role of the sector in
omni-channel retailing and the inherent flexibility of the real estate
for both owner and occupier. Over the course of 2022, the sector’s
vacancy rate fell from 6.1 per cent to circa 5 per cent
4
, driven by the
expansion of discount and convenience led retailers. As we enter a
period of more constrained consumer spending, the sector’s tenant
base is aligned to continue to drive footfall and turnover, with the
additional benefit of a business rates revaluation that will see rating
liabilities fall, lending further support to retailer profitability. The
occupational market remains in a strong position and has generated
an attractive income return of 5.7 per cent over the year.
The high street retail sector has been less exposed to the pricing
correction seen over the period, as the sector benefitted from a
relative yield defence afforded by higher starting yields. Despite
the structural changes to the sector that have driven this yield
expansion, the occupational markets again remain resilient, helping
to support an attractive income return from the sector. In Central
London, we have seen a rebasing of rents to realistic levels, which
in turn has spurred occupier activity and is forming a basis for a
recovery in rental tone, supported by increasing footfall.
The office sector is the most nuanced and remains highly polarised
between prime and secondary stock. Occupiers are seeking high
quality space with strong amenity provision to serve as an attractive
environment for employees within hybrid working structures. A
key tenet of office specification is the ESG credentials, which are
being prioritised by occupiers and investors alike given the cost
implications from both an operational efficiency perspective and
the potential capital expenditure liability of retro-fitting obsolescent
office stock. This has served as the primary driver of the polarisation
in the sector, as core assets are able to generate the rental uplift
required to underpin the financial viability of Grade-A refurbishment,
while occupier demand for secondary space has declined rapidly.
Over the period, the sector produced a total return of -9.5 per cent,
driven by capital declines of -12.6 per cent. However, as an indicator
of the divergence within the sector, the West End office sub-sector
generated a total return of -6.0 per cent predicated on lesser capital
declines of -8.6 per cent.
Portfolio performance
The total return from the portfolio was -6.5 per cent over the 12
months, compared with the MSCI return of -8.9 per cent. The
portfolio has outperformed the wider Index on both capital and
income returns over the period. Capital growth from the portfolio
was -10.5 per cent compared with the MSCI return of -12.4 per cent,
while the portfolio generated a 4.5 per cent income return, against
the Index at 4.0 per cent.
1
Real Capital Analytics
2
MSCI UK Quarterly Property Index December 2022
3
Savills, UK Logistics: Big Shed Briefing January 2023
4
https://pdf.euro.savills.co.uk/uk/commercial-retail-uk/uk-retail-warehousing-
december-2022.pdf
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Midlands 21.3% (21.4%)
London – West End 27.5% (25.4%)
Scotland 11.6% (11.7%)
North West 12.2% (13.4%)
Rest of London 1.7% (1.6%)
South West 2.3% (2.5%)
South East 23.4% (24.0%)
Geographical Analysis
as at 31 December 2022, % of total property portfolio
(figures as at 31 December 2021 in brackets)
Source: Columbia Threadneedle REP AM plc
Source: Columbia Threadneedle REP AM plc
Offices 31.6% (32.3%)
Alternative 10.5% (10.6%)
Industrial 28.9% (30.6%)
Retail Warehouses 11.6% (10.9%)
Retail 17.4% (15.6%)
Sector Analysis
as at 31 December 2022, % of total property portfolio
(figures as at 31 December 2021 in brackets)
Lease Expiry Profile
At 31 December 2022 the weighted average lease length for
the portfolio, assuming all break options are exercised, was
5.2 years (2021: 5.2 years)
Source: Columbia Threadneedle REP AM plc
40.1%
56.0%
8.2%
4.9%
36.7%
29.3%
15.0%
9.8%
0%
10%'
20%
30%
40%
50%
60%
0 - 5 years 5 - 10 years 10 - 15 years 15 - 25 years
% of leases expiring (weighted by rental value)
Lease Length
31 December 2022
31 December 2021
The largest occupiers, based as a percentage of contracted rent, as
at 31 December 2022, are summarised as follows:
Income Concentration
Company Name % of Total
Income
Apache North Sea Limited 4.7
CNOOC Petroleum Europe Limited 4.6
JPMorgan Chase Bank, National Association 4.3
Marks and Spencer plc 3.6
Kimberly-Clark Limited 3.6
Virgin Atlantic Limited 3.6
University of Winchester 3.5
Transocean Drilling U.K. Limited 3.3
Nestle Purina UK Commercial Operators Limited 3.3
DHL Supply Chain Limited 3.2
Total 37.7
Source: Columbia Threadneedle REP AM plc
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Valuation and capital performance
In a reversal of recent trends that had seen the portfolio’s
industrial assets act as the engine of performance, the portfolio’s
top performers over the 12 months have come from the wider
retail sector. Most notably, the portfolio’s largest asset, the
mixed-use Central London holding at St Christopher’s Place. The
asset has endured a number of years of yield expansion and is
valued approximately 20 per cent lower than pre-pandemic levels.
As activity in London West End recovers, a number of asset
management initiatives to generate rental growth have been
progressed.
The Company’s retail warehousing holdings have also delivered
strong outperformance with a positive total return of 1.9 per cent
against the Index at -1.0 per cent. In recent years, we have been
repositioning our retail parks towards grocery, convenience and
discount retailers, aligning our assets to essential retailing at a time
of more constrained consumer spending. The attractive tenant line-
ups have driven footfall, in turn generating strong occupier demand
that has resulted in all available units becoming fully committed
in the course of the year. This accretive asset management
activity has insulated the parks from the wider market-led yield
decompression, delivering relative outperformance alongside an
attractive income return of 5.3 per cent.
The Company’s office assets, which comprise high quality buildings
with robust fundamentals in resilient locations, have delivered a
total return of -7.2 per cent, against the Index return of -9.5 per
cent. We have been able to make accretive investment into our
core holdings, driving occupier demand, rental growth and capital
performance.
The industrial sector experienced the most severe capital falls in
the second half of the year following a reversal of the significant
and sustained yield compression of recent years. Consequently,
the portfolio’s industrial holdings generated a total return of -15.8
per cent, against the Index return of -14.4 per cent, predicated
on capital declines. Despite this, we remain confident with our
industrial holdings as the sector retains strong occupational
fundamentals and growth prospects, with portfolio assets offering
reversionary income potential in excess of 40 per cent.
The Company’s exposure to the alternatives sector is dominated
by Burma Road Student Village in Winchester. While the asset
benefits from an attractive long-term inflation-linked lease, the
leasing structure is closely correlated with the financial markets and
therefore saw yield expansion over the period, resulting in a capital
decline of -10.8 per cent. However, the student housing sector itself
retains strong fundamentals supported by a variety of economic and
demographic drivers.
Income Analysis and Voids
As we enter a lower growth environment the ability to generate a
yield advantage will be a key driver of relative performance. Over the
12-month period, the Company’s portfolio has delivered an income
return of 4.5 per cent, against the Index at 4.0 per cent.
The portfolio vacancy rate increased from 2.0 per cent by ERV to
5.9 per cent. The increase in vacancy can be attributed to a 92,000
sq ft office at Stockley Park, Uxbridge following the tenant vacating
at lease expiry in March 2022. Given the strategic location of the
holding, the asset carries significant alternative use value, and
we are working alongside prospective occupiers and the planning
authorities to progress a value-accretive redevelopment strategy.
Excluding the holding at Stockley Park, the vacancy rate stands at
1.4 per cent. This is testament to the continued resilience of the
occupational markets across the sub-sectors.
At 31 December 2022 the weighted average unexpired lease
term (WAULT) for the portfolio, assuming all break options are
exercised, was 5.2 years. The portfolio WAULT offers an attractive
balance between income security and the availability of lease
events as opportunities to convert rental growth into income. This
is particularly relevant within the Company’s industrial portfolio.
The average period to lease events including rent reviews on the
industrial holdings is 4.1 years, an attractive characteristic within
a sector that continues to be characterised by an in-built reversion
and rental growth.
Rent collection has been an area of keen focus in recent years
following the impact of the Coronavirus pandemic. Rent collection
has now normalised at pre-pandemic levels, with collection for 2022
standing at 99 per cent.
Approximately 27 per cent of the portfolio’s income profile is
supported through the presence of fixed-uplifts and inflation-linked
rent review mechanisms within occupational leases.
Asset Management
Industrial and Logistics
As mentioned above, the Company’s industrial portfolio offers an
in-built income reversion in excess of 40 per cent. The conversion
of this potential into tangible growth will therefore be central to
maintaining and growing the portfolio income return. During the
course of the year, we have completed a number of successful
asset management initiatives, which demonstrate the continued
rental growth in the sector.
The Cowdray Centre, Colchester
This multi-let industrial estate has seen significant leasing activity.
Unit 2 Mason Road was let to UK Plumbing Supplies on a new
15-year lease at a rent that underlines a steady improvement in
the estate’s rental tone. The letting was delivered following the
completion of fabric upgrade works which enhanced the unit’s
ESG credentials, including a B-rated EPC. Following this letting, the
adjacent unit has been placed under offer to a major UK occupier, at
a rent again showing further growth.
Refurbishment works are being rolled out across the estate and
investment of this nature has proven a driver of occupational
demand and value appreciation, while also protecting the asset’s
long-term liquidity. During the course of the year, Units 12 and
13 were also refurbished and relet, achieving record rents for the
estate.
The estate is also subject to a wider capital project for the
development of a multi-let trade counter scheme, which is now in
the planning phase. Viability is under close review given the wider
market impact on construction costs and capitalisation rates,
although strong occupier demand and sustained rental growth lend
support to the scheme.
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Units 1 & 2 Strategic Park, Southampton
The tenants of this two-unit scheme had signalled an intention
to vacate at their lease expiries in August 2022, enabling us to
progress a significant refurbishment strategy to modernise the
assets, enhance ESG credentials and drive the rental value.
Significant dilapidations settlements were agreed and we have
received planning permission for the enhanced scheme which is
due to complete in June 2023. Marketing of the units is underway,
and we anticipate strong demand for the highly specified and
strategically located accommodation.
Hams Hall Industrial Estate, Birmingham
This 226,000 sq ft prime distribution facility was subject to
outstanding rent review as at July 2021. The review has now been
settled at a rent representing a 9 per cent uplift against the previous
passing rent.
Quintus Business Park, Burton-upon-Trent and Hurricane 52,
Estuary Business Park, Liverpool
The development fundings of these two industrial assets have
now completed, enhancing portfolio exposure to this strategically
important sector.
Unit 4, Quintus Business Park in Burton-upon-Trent was committed
under a forward-funding arrangement in December 2021 for a price
of £21.5m. The highly specified logistics unit of 170,000 sq ft,
which carries an A-rated EPC and a BREEAM Excellent certification,
reached practical completion in September 2022. A new 15-year
lease to Werner UK completed and the already reversionary rent is
subject to inflation-linked increases.
The speculative development of the 52,000 sq ft Hurricane 52 in
Speke, Liverpool also reached practical completion at a cost of circa
£4.2m. This mid-box logistics was developed on land already owned
and adjoins an existing ownership. Since completion, the unit has
received a good level of occupier interest, aided by its specification
which includes solar photovoltaic panels.
Across the industrial portfolio, we are looking at a number of solar
installations to boost our renewable energy generation capacity. We
are actively engaged with occupiers on assets in Burton-upon-Trent,
Markham Vale, Liverpool and Daventry.
Retail Warehouses
Our prime retail parks have been a key driver of relative
outperformance, following significant asset management activity. All
units across both parks have become fully committed to national
multiple occupiers that compliment an attractive and robust tenant
mix, while competitive tension has seen both rent and rental values
grow by 3 per cent across the parks. Across both schemes footfall
remains very strong, with both car parks operating at near-full
capacity.
Newbury Retail Park, Pinchington Lane, Newbury
During the year units have been leased to Pets at Home, JD Sports,
Cancer Research and Tim Hortons, resulting in all landlord available
space on Newbury Retail Park being fully committed. We have also
seen existing occupiers committing to the scheme, with Currys PC
World taking a new 10-year lease on renewal at a rent in advance of
ERV. The leasing successes underline not only the resilience of the
occupational market, but also the dominance of Newbury Retail Park
within this affluent and growing catchment.
Sears Retail Park, Solihull
Following the 2021 development of a flagship Marks & Spencer’s
anchor store, we have built on the momentum generated to secure
the full occupation of the park. The lettings completed not only
maximise the scheme’s income stream but also widen the range of
uses to appeal to a growing customer base.
Pure Gym have taken a new 15-year lease of Unit 2 and Mountain
Warehouse have completed a new 5-year lease of Unit 3, with both
deals being executed in line with ERV. Similarly to Newbury Retail
Park, the lettings facilitate the upgrade of the units’ façades as part
of a phased upgrade programme.
Retail
St. Christopher’s Place (‘Estate’) (retail/office/alternatives)
The Company’s flagship 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.
The Covid pandemic had a significant impact on the asset and its
valuation remains at a 21 per cent discount to its pre-pandemic
level. However, the asset is now in a recovery phase and has been
the Company’s strongest performer over the 12 months.
The year has seen a marked stabilisation and recovery in the Central
London retail market. As hybrid working models have taken hold and
domestic and international travel recovered to pre-pandemic levels,
footfall statistics within London’s West End continue to improve.
This has been assisted by the opening of the Elizabeth Line at Bond
Street, which has seen footfall through the station increase by circa
25 per cent.
Occupational demand has also rebounded as prime rents have
been rebased and the revaluation of business rates will see an
approximate 40 per cent reduction in the rates payable on Oxford
Street. In December 2022 there were 10 retail units on the prime
stretches of Oxford Street under offer, with a consistent rental tone
emerging. Within this improving context, St Christopher’s Place has
returned to capital growth for the first time since 2018 and the
portfolio’s top performing asset over the year.
Market-led recovery has been supplemented by a strategic
repositioning of the asset towards the Food & Beverage (‘F&B’)
sector. From an asset perspective the strategy has been conceived
to drive footfall, consumer spend and dwell time, while from a fund
perspective the F&B markets offer longer leases alongside a higher
rental tone. The strategy has begun to yield tangible results; the
Estate is outperforming the wider West End in terms of footfall
recovery with footfall over the festive period showing a 15 per cent
increase from 2019. Strong tenant retention has maintained the
income profile while occupier demand across the holding’s sub-
markets has seen the Estate’s rental value grow during the course
of the year.
Key initiatives delivered over the period include:
• The enhancement of the Estate’s F&B offering, with lease
renewals concluding with the Lamb & Flag pub and restaurants
Olivelli and Sofra. Restaurant concept Bao (part of the JKS group)
has been added to the occupier line-up, while terms are agreed
with a new anchor restaurant tenant alongside a wine bar.
• Lease renewals and regears have been concluded with retailers
Whistles, L’Occitane and Castle Fine Art.
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• Numerous pop-up retail lettings completed to maintain net
operating income and vibrancy of the shopping environment.
• Refurbishment works have completed across a number of office
suites, while seven new office leases have completed.
• The residential portfolio of 66 apartments represents 21.1 per
cent of the capital value of the estate and has completed its
recovery in both income and occupancy levels and is now ahead
of pre-pandemic levels.
• Plans for the ongoing enhancement of the public realm continues
in stages, with new feature lighting due to be installed and
productive discussions ongoing with key stakeholders concerning
long term improvement proposals for James Street and Barrett
Street.
• Strategic ancillary holdings placed under offer to boost the wider
asset’s liquidity.
Offices
Our office portfolio is characterised by prime assets which are
occupied by a high-quality tenant base. This has allowed us to make
accretive investment into our offices, in turn spurring tenant demand
and rental growth which has underpinned income outperformance. In
a nuanced market context, the portfolio’s assets are well positioned
given their strong fundamentals derived from a strategic focus on
high-quality holdings in core locations.
Alhambra House, Glasgow
This office holding in central Glasgow is subject to an ongoing
repositioning and refurbishment strategy, leveraging the asset’s
strong residual value. In the interim, the existing tenant JP
Morgan has extended their lease by a further year to March 2024,
generating an additional £1.9m in rent alongside a significant
contractual dilapidation settlement. This lease extension allows us
to progress the planning process in the background, helping us to
minimise interruption to the development programme on expiry.
2-4 King Street, London
All office suites at this prime multi-let holding are occupied and
a number of tenants have committed to new leases at increased
rents, driving a 7 per cent uplift in rental value over the course of
the year. The art gallery tenant of the ground and basement levels
has committed to a 10-year reversionary lease at a rent showing a
16 per cent uplift to the previous passing rent. Similarly, the tenant
of the 4th floor office suite has entered into a 5-year reversionary
lease at a rent representing a 22 per cent premium to the previous
passing rent.
17A Curzon Street, London
This prime multi-let asset in London’s West End is subject to
a phased refurbishment, repositioning the asset and boosting
ESG credentials. The year has seen two lease regears complete,
delivered at a combined uplift to the passing rents. The lease of
the sixth floor was surrendered, releasing the suite for repositioning
which will enable us to push the rental tone to in excess of £100 psf
for this terraced top floor suite, with collateral benefit to the wider
building.
82 King Street, Manchester
This substantial 82,000 sq ft multi-let office holding in Manchester’s
office core has seen significant leasing activity as existing tenants
continue to commit to the building. Most notably, NM Rothschild
entered into a 10 year reversionary lease of their 7th floor suite at
a rent showing a 12 per cent uplift to the passing level. Post-period,
Lloyds Bank have completed a new 5-year lease on their 10th floor
suite.
Alternatives
The portfolio’s alternatives holdings include the purpose-built
student accommodation in Winchester, residential properties at St.
Christopher’s Place and the leisure units at Wimbledon Broadway.
Burma Road Student Village in Winchester holds benefits from a
long lease to the university, with the benefit of annual RPI linked
rent reviews. During the course of the year, the University has made
significant investment into the holding, installing solar panels and
air source heat pumps throughout the estate, which materially
enhances the asset’s ESG credentials.
The long-let residential holdings at St Christopher’s Place are fully
occupied, while the occupancy levels and rental values of the
serviced apartments are now ahead of 2019 levels. The residential
element of St Christopher's Place is significant and accounts for 4.7
per cent of the value of the portfolio.
Investment Activity
Following asset disposals totalling some £200m in 2021, there were
no further sales during 2022. The key driver for these sales was
a strategy to recycle capital and adjust sector weightings towards
our favoured sectors of industrial/logistics, retail warehousing and
alternatives (primarily student housing and hotels).
While this strategy carried through to the early stages of 2022,
pricing for assets within our favoured sectors had become extremely
competitive. While a number of bids were made, primarily in the
alternative sectors, we did not consider the investment market to
London, Birchin Lane
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offer long-term fair value and therefore withdrew from bidding in Q2
2022.
The first half of 2023 is likely to be characterised by continued
pricing pressure and in this market context, there may be the
opportunity to acquire high quality assets at attractive long-term
pricing. We continue to closely appraise the investment market,
seeking exceptional value for assets that accord with our investment
strategy. As liquidity in the wider investment market improves in the
latter part of 2023, we anticipate further disposals from the portfolio
to advance our capital recycling strategy. We have identified potential
asset sales, principally focussing on down-weighting exposure to
offices as we continue to align the portfolio towards targeted growth
sectors. The timing of any such disposals will be instigated to take
advantage of both asset and market cycles to deliver optimal value
to the Company.
Outlook
The challenges that impacted the real estate market in 2022 remain
as we enter 2023 and investors have maintained a risk averse
approach to the sector, awaiting greater clarity on pricing in the first
quarter of the year. The investment market remains relatively muted
as value protection is at the forefront of investor thinking, with a
prevailing disconnect in expectations between buyers and sellers.
Inflationary pressures and the cost of debt are easing, gilt and swap
markets have settled, and the Bank of England has signalled that
their forecast for growth for 2023 is less negative than previously
feared. There is therefore an expectation that the real estate market
will move to a recovery phase in the second half of 2023 although
the impact of credit tightening from the recent banking market
volatility have created further uncertainty.
As capital growth returns, the diversification of the Company’s
portfolio offers both a steady footing alongside growth potential. We
expect continued recovery at St Christopher’s Place to be a bedrock
of returns. The industrial and retail warehousing sectors – which
account for over 40 per cent of the portfolio – have been oversold
but retain a strong performance outlook founded on their critical
role in UK business and consumer infrastructure. Much has been
made of the uncertain outlook for the offices sector, but the portfolio
is aligned towards prime assets that continue to meet occupier
demand. The portfolio is therefore aligned to continue to deliver
capital outperformance, founded on the portfolio’s prime nature that
will benefit from a flight to quality.
Income is the driver of real estate returns in the long run. Across the
sectors, the occupational markets have been relatively resilient. The
Company’s portfolio is generating an attractive yield premium at a
time when income will dominate totals returns. The portfolio offers
strong reversionary rental potential alongside ample opportunity
for delivery of this income upside, with priority projects for the year
ahead including the repositioning of Stockley Park, Uxbridge, the
redevelopment and reletting of Strategic Park, Southampton and the
delivery of continued incremental growth at St Christopher’s Place.
Maintaining a low vacancy and exploiting lease events to crystallise
rental uplifts will be of paramount importance in generating a stable
and growing income stream, alongside capital appreciation.
Richard Kirby and Daniel Walsgrove
Columbia Threadneedle REP AM plc
18 April 2023
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Property Portfolio
as at 31 December 2022
Property Sector
Properties valued in excess of £200 million
London W1, St. Christopher’s Place Estate (footnotes 2 and 3) Retail/Office/Alternative*
Properties valued between £50 million and £70 million
Newbury, Newbury Retail Park Retail Warehouse
Solihull, Sears 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
Liverpool, Unit 1, G. Park, Portal Way Industrial
Markham Vale, Orion One & Two Industrial
Manchester, 82 King Street Office
Birmingham, Unit 8 Hams Hall Distribution Park Industrial
Daventry, Site E4, Daventry International Rail Freight Terminal Industrial
Aberdeen, Unit 2 Prime Four Business Park, Kingswells Office
Aberdeen, Unit 1 Prime Four Business Park, Kingswells Office
Crawley, The Leonardo Building, Manor Royal Office
Properties valued between £20 million and £30 million
Birmingham, Unit 10a Hams Hall Distribution Park Industrial
Bristol, One Cathedral Square (footnote 1) Office
London SW1, 2/4 King Street Office
Aberdeen, Unit 3 Prime Four Business Park, Kingswells Office
Colchester, The Cowdray Centre, Cowdray Avenue Industrial
Glasgow, Alhambra House, Waterloo Street Office
London W1, 17a Curzon Street Office
Properties valued between £10 million and £20 million
Burton on Trent, Quintus at Branston Locks Industrial
London EC3, 7 Birchin Lane Office
Southampton, Upper Northam Road, Hedge End Industrial
Birmingham, Unit 6a Hams Hall Distribution Park Industrial
Liverpool, Unit 1 The Hive, Estuary Business Park (footnote 1) Industrial
Camberley, Watchmoor Park, Building C Office
Edinburgh, Nevis/Ness Houses, 11/12 Lochside Place Office
Uxbridge, 3 The Square, Stockley Park Office
London W1, 16 Conduit Street (footnote 1) Retail
Properties valued under £10 million
Camberley, Affinity Point, Glebeland Road Industrial
Aberdeen, Unit 4 Prime Four Business Park, Kingswells Office
Liverpool, Unit 2 & 4 The Hive, Estuary Business Park (footnote 1) Industrial
Liverpool, Hurricane 52, Estuary Business Park Industrial
Solihull, Oakenshaw Road Retail Warehouse
Notes:
1 Leasehold property.
2 Mixed freehold/leasehold property.
3 For the purpose of the Company's Investment policy, St. Christopher's Place Estate is treated as more than one property.
* Mixed use property of retail, office and residential space.
** Mixed use property of retail and leisure.
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Environmental, Social and Governance (ESG)
A summary of the Company’s approach and progress against its
ESG commitments is set out below, whilst our 2022 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 weapons 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
Leadership and effectiveness
Board Composition
The Company recognises the benefits of diverse Board membership
and has exceeded the Hampton-Alexander recommendations by
having 50% female representation. Following Mrs Clark's retirement
in May 2023, the Board will continue to meet this recommendation
by having 40% female representation. This position aligns with the
recommendations of the FTSE Women Leaders Review and the
target set out in the Listing Rules (which applies in respect of the
Company's financial year ending 31 December 2023). The Board is
also mindful of the recommendations of the Parker Review and the
Listing Rules target regarding the ethnic background of the Board
(which also applies in respect of the Company's financial year ending
31 December 2023).
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. An ESG Committee was established
during the year.
VISION
DIRECTION
DELIVERY
MONITORING
METRICS
ESG Policy Statement
ESG strategic priorities
Operational tools and processes
ESG data capture and third party platforms
ESG performance and disclosure
How the Property Managers implement ESG
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24 | Balanced Commercial Property Trust Limited
Strategic Report
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. Representing
its fifth year of participation, the
Company achieved a score of 70,
reversing the 7 point increase from
the previous year, mostly reflecting
the challenges faced in obtaining occupier utility consumption given
prevailing economic priorities.
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 tool 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 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 also
provides a basis for
classifying assets
according to the key
ESG characteristics,
principally for the
purpose of establishing
materiality and
allocating resources
and implementing
routine actions
accordingly. The
Company maintains
100% Energy
Performance Certificate
(“EPC”) coverage by
demise and all assets
have been classified
according to energy performance rating and / or degree of landlord
energy consumption. Through its Property Managers, the Company
is currently reflecting on the need to modify its existing classification
system to take account of property characteristics relative to its
net zero carbon ambition and to highlight the degree of intervention
necessary to reposition all EPCs to a minimum of B rating by 2030.
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 it 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. Since the last reporting year, the
Company’s absolute carbon emissions have decreased by 26%,
largely attributable to the disposal of Casinni House. Whilst energy
consumption on a like-for-like basis increased marginally, by less
than 1%, gas consumption on a similar like-for-like basis decreased
by 18%. The overall energy intensity of the portfolio increased by 6%.
More granular detail of performance over the last twelve months can
be found in the 2022 ESG Report.
Renewable energy sources
The Company has increased its focus on developing a pipeline of
potential opportunities for installing solar photo-voltaic 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 looked to obtain renewable energy supplies through Renewable
Energy Guarantees of Origin (REGO) contracts for all assets where
it has responsibility for procurement. During 2022, 100% of both
electricity and gas contracts under Company control were procured
under such green tariffs.
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 2022, 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. The Company welcomes regular
engagement with investors to understand their expectations in this
regard.
Level 3 - where EPC rating is F or G and/or annual
landlord energy spend is >£50,000
Level 1 - where EPC rating is A+ to D and there is no
landlord energy spend
Level 2 - where EPC rating is E and/or annual landlord
energy spend is between £0 and £50,000
Asset classification
(distribution by number of properties)
Level 3
Asset classifications
Level 2
Level 1
Source: BMO REP Asset Management plc
14
31
28
Level 3 - where EPC rating is F or G and/or annual
landlord energy spend is >£50,000
Level 1 - where EPC rating is A+ to D and there is no
landlord energy spend
Level 2 - where EPC rating is E and/or annual landlord
energy spend is between £0 and £50,000
Asset classification
(distribution by number of properties)
Level 3
Asset classifications
Level 2
Level 1
Source: BMO REP Asset Management plc
14
31
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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 fourth year in succession
in August 2022. A rating of C to indicate taking a coordinated
approach to climate change was achieved. The current rating is
comparable to the average performance for the financial services
sector and the regional average for Europe.
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 fourth 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 2022,
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 C.
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 in its 2022 ESG
Report, updating the road-map first produced in 2018.
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Winchester, Burma Road
26 | Balanced Commercial Property Trust Limited
Edinburgh, Nevis/Ness Houses
•
Committed to Net Zero
Carbon by 2040 or sooner
•
26% reduction in absolute
carbon emissions compared
to the previous year
•
100% of electricity and 100%
of gas contracts on certified
renewable tarriffs
•
0% exposure to
organisations connected to
controversial weapons
•
GRESB Public Disclosure
Rating of A
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Spotlight: big strides, small steps
Whilst the aims and aspirations within commerce and business are often common, particularly today in terms of environmental,
social and governance issues, commercial real estate presents a distinct set of challenges, not least of which is rights of access to
take opportunities to make interventions that matter.
It is recognised that the design and construction of new buildings affords the best opportunity to create structures that are
sustainable in the long term, but the frequency at which this can be done tends to be limited and framed in multiple decades. Major
refurbishment and the use of existing forms and components, or the repurposing of buildings for contemporary needs, is intrinsically
more sustainable but the prospects of gaining vacant possession in a sector often constrained by contractual lease arrangements
means opportunities may arise infrequently and be framed in many handfuls of years. Whilst often considered as being under the
radar, the more frequent and regular smaller upgrade and refreshing of assets can collectively have significance in making meaningful
strides towards an overall ambition.
Here we present three such small projects, each on their own relatively unassuming, but collectively helping to move the fund’s ESG
credentials progressively forward.
Unit 2, Cowdray Centre, Colchester,
Located on a key arterial road in this historic Essex town, this industrial premises is one of eighteen units owned
by the Company on the estate and extends to 17,870 square feet.
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28 | Balanced Commercial Property Trust Limited
Stategic Report
• Roof covering, doors, windows and roller shutters doors all
replaced with quality materials to result in significant thermal
improvement to the building
• Solar photo-voltaic panels installed on roof to generate
contribution to occupier overall energy demand
• Energy performance certificate rating improved from original
G-201 rating to a future-proofed B-44
• Rainwater gutters and downpipes replaced and designed to
provide 30% betterment in capacity to mitigate potential impacts
of increased acute rainfall occurrences on account of climate
change
• Efficient heating, lighting, ventilation and air-conditioning system
introduced into the offices together with extended provision of
showering and bathroom facilities
The building was comprehensively refurbished during the year to include:
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• The removal of old and severely weathered translucent roof lights, providing the opportunity to re-clad areas of the roof and vastly
improve insulation qualities and therefore the thermal qualities of the building.
• Additional paint overcoat and treatment of commonly occurring corrosion at the cut end of metal roofing sheets.
• Improvement of energy performance certificate rating from original D-84 to a future-proofed A-18.
• The installation of a new replacement shopfront providing presence and sympathy with surrounding units.
• Collaboration with the new occupier to ensure the environmental qualities of the building were preserved on fit-out.
Unit 3, Sears Retail Park, Solihull
This tired unit, extending to 10,000 square feet and formerly occupied by Argos, has been sympathetically refurbished
with a key objective to blend in with the style of other recently refurbished premises on the prominent retail park, with
key features being:
Before After
Unit 2, Oakenshaw Road, Solihull
The Managers worked with Puregym, the occupiers of this 7,500 square foot unit, and with the help of a modest capital contribution
persuaded the tenant to forego their standard gas-based solution for heating their significant hot water demand in favour of a more
environmentally friendly and future-proofed electric based solution.
Whilst the works have not made a material difference to an already efficient structure in terms of formal energy performance rating,
the benefit will be realised in the form of lower carbon emissions attributable to the tenant and to the landlord’s wider net zero carbon
ambitions.
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30 | Balanced Commercial Property Trust Limited
Governance Report
Trudi Clark FCA
Status: Independent non-executive Director and
Chairman of the Audit and Risk Committee
Date of appointment: 4 February 2014
Country of residence: Guernsey
Experience: Trudi Clark is a former Chief
Executive Officer of Schroders (C.I.) Limited and
has over 30 years’ experience in the financial
services industry. She is a non-executive
director of a number of Guernsey based funds
and companies.
Other public company directorships:
The Schiehallion Fund Limited, Taylor Maritime
Investments Limited and NB Private Equity
Partners Limited.
Linda Wilding ACA
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:
Sherborne Investors (Guernsey) C Limited.
Isobel Sharp
Status: Independent non-executive Director
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 was formerly a
director of the UK Green Investment Bank plc and
of the global asset manager, Winton Group Ltd.
Other public company directorships:
IMI plc and The Bankers Investment Trust plc.
John Wythe FRICS
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.
Hugh Scott-Barrett
Status: Independent non-executive Director and
Senior Independent Director
Date of appointment: 4 January 2021
Country of residence: UK
Experience: Hugh Scott-Barrett has experience at
board level for over 20 years’ across real estate,
asset management, and banking. He was Non-
Executive Chairman at Capital & Regional plc
until May 2020 and was Chief Executive of the
Company prior to this from 2008-2017. He was
previously a member of ABN AMRO’s managing
board serving as Chief Operating Officer and
Chief Financial Officer and before that worked at
SBC Warburg and Kleinwort Benson.
Other public company directorships:
Irish Residential Properties REIT plc.
Directors
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.
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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 reader 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 2022 as follows:
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 4 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
40 and 41, provides detailed information on the remuneration
arrangements for Directors of the Company, including the Directors
Remuneration Policy. Shareholders will be asked to approve the
policy at the AGM on 31 May 2023. 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 also be
asked to approve the Remuneration Report (Resolutions 2 and 3).
Directors
The names of the Directors who have held office during the
year, along with their biographical details, are set out on page
30. Trudi Clark will not stand for re-election at this year's AGM,
having served on the Board for nine years. The remaining
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
Directors’ Report
The Directors submit the Annual Report and Consolidated Financial Statements of the
Company for the year ended 31 December 2022. The Directors biographies; Corporate
Governance Statement; Report of the Audit and Risk Committee; and the Remuneration
Report form part of this Directors’ Report.
Interim Dividends 2022
Payment
date
Rate per
shares
Ninth interim for prior year 31 January 2022 0.375p
Tenth interim for prior year 28 February 2022 0.375p
Eleventh interim for prior year 31 March 2022 0.375p
Twelfth interim for prior year 29 April 2022 0.375p
First interim 31 May 2022 0.40p
Second interim 30 June 2022 0.40p
Third interim 29 July 2022 0.40p
Fourth interim 31 August 2022 0.40p
Fifth interim 30 September 2022 0.40p
Sixth interim 31 October 2022 0.40p
Seventh interim 30 November 2022 0.40p
Eighth interim 30 December 2022 0.40p
Three further interim dividends, each of 0.4p per share, were paid
on 31 January 2023, 28 February 2023 and 31 March 2023. The
twelfth interim dividend in respect of the year, of 0.4p per share,
will be paid on the 28 April 2023 to shareholders on the register on
14 April 2023.
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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 36, the Board considers the
recommendations of the Management Engagement Committee,
which is satisfied with the Managers’ ability to deliver investment
performance and the quality of other services provided. It is
therefore their opinion that the continuing appointment of the
Managers on the terms agreed is in the interests of shareholders
as a whole.
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.
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.
32 | Balanced Commercial Property Trust Limited
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 5 to 8) and
election of a Director (Resolution 9).
Resolution 5 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 6 relates to the re-election of Paul Marcuse who has
served over six years and brings in-depth expertise and experience
with over 40 years’ of working in the real estate and finance
sectors.
Resolution 7 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 8 relates to the re-election of Hugh Scott-Barrett. Hugh
brings valuable experience having worked at Board level for over
20 years across real estate, asset management, and banking.
Resolution 9 relates to the 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.
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 (previously BMO 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.
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Share Structure
As at 31 December 2022 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 2022 the Company had received notification of
the following holdings of voting rights (under the Financial Conduct
Authority’s Disclosure Guidance and Transparency Rules):
Percentage
There have been no changes notified to the Company in respect of
the above holdings, and no new holdings notified, since the end of
the year.
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 49, have been prepared in accordance and in compliance
with current International Financial Reporting Standards and The
Companies (Guernsey) Law, 2008 as amended. The significant
accounting policies of the Group are set out in note 1 to the
consolidated financial statements. The unqualified auditor’s opinion
on the consolidated financial statements appears on pages 43 to
48.
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 Group’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 and the debt covenants, in particular
those relating to loan to value and interest cover. They have not
identified any material uncertainties which cast significant doubt
on the ability to continue as a going concern for the foreseeable
future, which is considered for a period of not less than 12 months
from the date of the approval of the financial statements. The
Board believes it is appropriate to adopt the going concern basis in
preparing the financial statements. The Group's longer-term viability
is considered in the Viability Assessment and Statement on page
14.
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 Investment Managers, however, does provide goods and
services and is 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 31 May
2023 is set out on pages 72 to 73.
Directors’ Authority to Allot Shares
Resolution 12 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 17 April 2023.
Resolution 13 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 13 gives the Directors, for the period until
the conclusion of the Annual General Meeting in 2024 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 17
April 2023.
The Directors will only allot new shares pursuant to the authority
granted by Resolutions 12 and 13, 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 purchased 51,555,643 Ordinary shares of 1p each
during the year, representing a nominal amount of £515,556 and
6.4 per cent of the issued share capital. All of the ordinary shares
bought back are held in treasury. As well as being NAV enhancing,
the Directors believe that they have been an effective tool in
improving the liquidity of the Company's shares.
Substantial Shareholdings
Number of
Ordinary Shares
Held
Percentage
Held*
Aviva Group 162,585,829 23.2
Black Rock 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 2022.
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Governance Report
The current authority of the Company to make market purchases
of Ordinary Shares expires at the end of the Annual General
Meeting and Resolution 14, 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 2024 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.
Reappointment of Auditor and Auditor’s
Remuneration
PricewaterhouseCoopers CI LLP has 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 10 and 11).
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 are 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
18 April 2023
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The following table sets out the Directors’ meeting attendance in
2022.
(1)
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.
(2)
I Sharp was appointed to the Board on 8 November 2022.
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, the renewal of share
buyback instructions and sign off on announcements and reports.
There was also an annual strategy session.
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 7. 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
Corporate Governance Statement
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.
Directors’ attendance in 2022
Board
Audit
and Risk
Committee
Nomination
Committee
Management
Engagement
Committee
ESG
Committee
No. of meetings 4 3 1 1 3
T Clark 4 3 1 1 3
J Wythe 4 3 1 1 3
P Marcuse
(1)
4 n/a 1 1 3
L Wilding 4 3 1 1 3
H Scott-Barrett 4 3 1 1 3
I Sharp
(2)
1 n/a n/a n/a n/a
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36 | Balanced Commercial Property Trust Limited
Governance Report
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 (which was formed in May 2022). 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 40 and 41, 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 38
and 39.
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, Directors are pleased with
the relative return from the portfolio and in particular the strong relative
income return. The Directors are also pleased with the high percentage
of rent collected in challenging market conditions and with the progress
made on ESG matters which are well integrated into the investment
process.
In December 2022, the Company’s Manager outsourced the provision
of property management services to Workman LLP, the UK’s largest
independent commercial property management consultancy.
Workman will be responsible for service charge management and
rent collection, under the supervision of the Managers. The Managers
retain responsibility for property accounting. The Managers will provide
information on Workman's performance to the Management Engagement
Committee.
In 2020, the Directors engaged an external consultant, bfinance, to carry
out an extensive review of the appropriateness of the Managers’ fees.
This included a deep dive into the work performed by the Managers and
an analysis of the fees charged by other Managers in the sector. It was
concluded that the level of fees charged is competitive. It is therefore
the Directors’ opinion that the continuing appointment of the Managers
on the current terms is in the interests of shareholders and this will be
reviewed again in 2023.
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 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 Committee is mindful of the recommendations of the Hampton
Alexander Review “improving gender balance in FTSE Leadership”,
in particular the recommendation that a Board should have at least
33 per cent female representation and the Company has complied
with this during the year. The Board is also aware of the UK’s Parker
Review recommendations, for leading global companies to have at
least one director from a minority ethnic background on the board by
December 2024 and will take this recommendation into account on
future appointments. In addition to these recommendations, 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.
Board Diversity
Although the Company is not required to report against the
diversity targets under the Listing Rules until the Annual Report,
in respect of the year ending 31 December 2023, the Board has
resolved to do so on a voluntary basis as at 31 December 2022.
In accordance with Listing Rule 9.8.6R (9), (10) and (11) the Board
has provided the following information in relation to its diversity.
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Board Gender as at 31 December 2022
(1)
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 took the decision
to establish an ESG Committee during the year, which comprises all
Directors and is chaired by Mrs L Wilding. The first meeting was held
in May 2022 and there have been two further meetings during the year.
In addition, the Chairman of the Committee meets the Managers' ESG
team on a monthly basis to review its action plan.
The Committee has been set up to oversee the formulation of the
Group’s ESG policy and strategy. 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 31 May 2023 is set out on pages 72 and 73. 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
18 April 2023
Number of
Board
members
Percentage
of the
Board
Number of
Senior Positions
on the Board
White British
or other White
(including
minority-white
groups)
6 100% 2
(2)
Other Ethnic
Groups
–
(3)
– –
Board Ethnic Background as at 31 December 2022
(1)
(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. The position of the Chairman of the Audit and Risk
Committee is not currently defined as a senior position under the Listing Rules.
However, the Board believes that, for a real estate investment trust, it should
be regarded as such as it is broadly equivalent to the Chief Financial officer of a
trading company.
(3)
This is less than the Listing Rules target of 1.
The information included in the above tables has been obtained
following confirmation from the individual Directors and no
changes to the Board have occurred since 31 December 2022.
As shown in the above tables, the Company has already met the
gender target but has yet to meet the ethnic background target.
These rules are formally in force in respect of the current financial
year ending 31 December 2023 and will therefore require to be
reported against in the Company's Annual Report to be published
in 2024. The Board will continue to take all matters of diversity
into account as part of its succession planning.
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Number of
Board
members
Percentage
of the
Board
Number of
Senior Positions
on the Board
Men 3 50% 2
Women 3 50%
(2)
–
(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 exceeds the Listing Rules target of 40%. Trudi Clark will retire from her
role as non-executive Director and Chairman of the Audit and Risk Committee
with effect from the AGM on 31 May 2023. Following this change to the Board,
women on the Board will be 40% and the Company will continue to meet the
Listing Rules target.
(3)
Senior positions prescribed by the Listing Rules are only relevant in part to a
real estate investment trust making the senior positions target more difficult to
comply with. The position of the Chairman of the Audit and Risk Committee is
held by a woman. Although this role is not currently defined as a senior position
under the Listing Rules, the Board believes that, for a real estate investment
trust, it should be regarded as such as it is broadly equivalent to the Chief
Financial officer of a trading company.
Report of the Audit and Risk Committee
Role of the Committee
During the year the Audit and Risk Committee comprised all
the Directors with the exception of the Chairman of the Board,
in accordance with good corporate governance. The Audit and
Risk Committee is chaired by Mrs T Clark who is a Chartered
Accountant. She qualified in 1985 and was a Senior Audit Manager
at KPMG. She held the position as Head of European Internal Audit
for Bank of Bermuda and in 1995 moved to Schroders (C.I.) Limited
as financial controller, before being promoted to Chief Executive
in 2003. Mrs Clark will retire from the Board at the AGM of the
Company on 31 May 2023 and Ms I Sharp will take on the role of
Chair of the Audit and Risk Committee. Ms Sharp 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.
The duties of the committee include reviewing the Annual Financial
Statements, the system of internal controls, the viability of the
Company, risk management and the terms of appointment and
remuneration of the auditor, PricewaterhouseCoopers CI LLP
(‘PwC’), including its independence and objectivity. It is also the
forum through which PwC reports to the Board of Directors. The
committee meets at least three times a year including at least one
meeting with PwC.
The Audit and Risk Committee met on three occasions during
the year and the attendance of each of the members is set out
on page 35. In the course of its duties, the committee had direct
access to PwC, senior members of the Investment Managers and
the Property Managers. Amongst other things, the Audit and Risk
Committee considered and reviewed the following matters and
reported thereon to the Board:
• the annual financial statements;
• the accounting policies of the Group;
• the principal risks faced by the Company and the
effectiveness of the Company’s internal control and risk
management environment including consolidation of the
assumptions underlying the Board’s Statement on Viability;
• the effectiveness of the external audit process and the
independence and objectivity of PwC, their re-appointment,
remuneration and terms of engagement;
• the policy on the engagement of PwC to supply non-audit
services and approval of any such changes;
• the implications of proposed new accounting standards and
regulatory changes;
• the receipt of Report on Internal Controls in accordance with
AAF (01/20) for the period 1 November 2021 to 31 October
2022 from the Managers; and
• whether the Annual Report is fair, balanced and
understandable.
External Audit Process
As part of its review of the scope and results of the audit, during
the year the Audit and Risk Committee considered and approved
PwC’s plan for the audit of the financial statements for the year
ended 31 December 2022. At the conclusion of the audit, PwC
did not highlight any issues to the Audit and Risk Committee
which would cause it to qualify its audit report. PwC issued an
unqualified audit report which is included on pages 43 to 48.
Non-audit services
In relation to the provision of non-audit services by the auditor,
it has been agreed that all non-audit work to be carried out by
the auditor must be approved in advance by the Audit and Risk
Committee and any special projects must also be approved in
advance. PwC no longer review the interim financial information
and there was no other non-audit work carried out by PwC for the
year ended 31 December 2022. In the previous year, PwC reviewed
the 2021 interim financial report for a fee of £19,000 and the
Audit and Risk Committee did not consider that the provision of
such audit-related services to be a threat to the objectivity and
independence of the conduct of the audit.
Auditor assessment, independence and
appointment
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 Audit and Risk 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 PwC in respect
of the year end Report and Consolidated Financial Statements.
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 and
the 2022 audit is her second year. The Audit and Risk Committee
recommends PwC for reappointment at the next Annual General
Meeting. PwC's performance will continue to be reviewed annually
taking into account all relevant guidance and best practice.
Internal Controls and Risk Management
The Board is responsible for the Company’s system of internal
control and for reviewing its effectiveness. It has therefore
established a process designed to meet the particular needs
of the Company 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
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the Company’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 Company’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
Company against its stated objective and comparable companies
and reviews the Company’s activities since the last Board meeting
to ensure that the Managers adhere to the agreed investment policy
and approved investment guidelines 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.
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 AAF (01/20)” for the period
1 November 2021 to 31 October 2022 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. 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.
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 page 36.
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.
Trudi Clark
Chairman of the Audit and Risk Committee
18 April 2023
Significant Matters Considered by the Audit and Risk Committee in Relation to the Financial Statements
Matter Action
Valuation of the Investment Property Portfolio
The Group’s property portfolio accounted for 92.5 per cent of its total
assets as at 31 December 2022. 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 the main area of audit focus and, accordingly, PwC
met with the valuers as part of the year-end process.
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 and the Audit and Risk Committee review the level of
rent collection and arrears at both the Audit Committee meetings
and ad-hoc Board meetings. An impairment provision has been
accrued in line with the accounting policy detailed in note 1(j).
Overview Strategic Report Governance Report Auditor’s Report Financial Report Notice of AGM Other Information
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 2022, 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 2023, despite
the current level of inflation. Fees were increased in 2022 by
£3,250 per Director, which was the first increase for four years and
equates to an annual increase over the last five years of under 1
per cent. This is with the exception of the Chairman of the recently
formed ESG Committee who will receive an additional £5,000 per
annum from 2023 onwards as a reflection of the additional work
involved in fulfilling this role.
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:
(1)
Director fee plus £8,250 as Senior Independent Director
(2)
Director fee plus £8,250 as Audit and Risk Committee Chairman
(3)
Director fee plus £5,000 as ESG Committee Chairman
Remuneration for the Year
The Directors who served during the year received the following
emoluments as fees:
40 | Balanced Commercial Property Trust Limited
Fees for services to the Company
2022
£
2021
£
P Marcuse* 70,250 58,875
T Clark
#
52,750 49,500
M Moore (retired 17 June 2021) – 31,107
J Wythe 44,500 41,250
L Wilding 44,500 41,250
H Scott-Barrett
(appointed 4 January 2021)
^
52,750 45,670
I Sharp
(appointed 8 November 2022)
6,584 –
Total
271,334 267,652
* Appointed Chairman from 17 June 2021
#
Appointed as Chairman of Audit and Risk Committee on 25 May 2015
^ Appointed Senior Independent Director from 17 June 2021
Annual fees for Board Responsibilities
2023
£
2022
£
Chairman £70,250 70,250
Director £44,500 44,500
Senior Independent Director
(1)
£52,750 52,750
Audit and Risk Committee Chairman
(2)
£52,750 52,750
ESG Committee Chairman
(3)
£49,500 N/A
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Governance Report
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:
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.
There have been no changes in the above interests since
31 December 2022.
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 32.
Voting at Annual General Meeting
At the Company’s last Annual General Meeting, held on 27 May
2022, shareholders approved the Directors’ Remuneration Report
as set out in the Annual Report in respect of the year ended 31
December 2021. 97.54 per cent of votes were in favour of the
resolution and 2.46 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 2020 where 97.25 per cent of votes were in favour and
2.75 per cent were against. An ordinary resolution for the approval
of the Directors Remuneration Policy will be put to shareholders at
the forthcoming Annual General Meeting.
On behalf of the Board
Paul Marcuse
Chairman
18 April 2023
Directors’ share interests
2022 2021
T Clark 56,200 56,200
P Marcuse 49,463 49,463
J Wythe 33,466 33,466
L Wilding 40,000 40,000
H Scott-Barrett 100,000 100,000
I Sharp 55,000 N/A
FINANCIAL HIGHLIGHTS
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GOVERNANCE REPORT
FINANCIAL REPORT
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Statement of Directors’ Responsibilities
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 30 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;
Environmental, Social and Governance and Spotlight: big
strides, small steps) 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
18 April 2023
42 | Balanced Commercial Property Trust Limited
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FINANCIAL HIGHLIGHTS
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2022 Annual Report and Consolidated Financial Statements | 43
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Independent Auditor’s Report to the Members
of Balanced Commercial Property Trust Limited
Report on the audit of the consolidated financial statements
Our opinion
In our opinion, the consolidated 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 2022 and of their
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 2022;
• 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, which include significant accounting policies 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.
Our audit approach
Overview
Audit scope
• 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 (formerly BMO Investment Business Limited) (the “Investment Manager”), Columbia Threadneedle REP AM plc
(formerly BMO REP Asset Management plc) (the “Property Manager”) and CBRE Limited (the “Property Valuer”).
Key audit matters
• Valuation of Investment Properties as at 31 December 2022.
• Revenue recognition
Materiality
• Overall group materiality: £11.6 million (2021: £13.5 million) based on 1% of group total assets.
• Performance materiality: £8.7 million.
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44 | Balanced Commercial Property Trust Limited
Auditor’s Report
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 our 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 auditors, 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.
This is not a complete list of all risks identified by our audit.
Key audit matter How our audit addressed the key audit matter
Understanding
We have updated our understanding and evaluation of 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 2022.
We considered the adequacy of the disclosures made in the
notes to the consolidated financial statements (critical accounting
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 2022.
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 determined that the assumptions
used in the valuations were supportable in light of available and
comparable market evidence.
We have not identified any matters to report to those charged with
governance.
Valuation of Investment Properties as at 31 December 2022
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 2022.
The valuation of the group’s investment property portfolio 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 valuations of the group’s investment property portfolio were
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.
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Key audit matter How our audit addressed the key audit matter continued
To address the completeness of rental income, 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 journals posted to the cash ledger directly to the amounts
in the bank statements.
To address the accuracy, cut off and occurrence of rental income, 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 confirm the accuracy
of 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 matters to report to those charged with
governance.
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.
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, and 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 £11.6 million (2021: £13.5 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% (2021: 75%) of overall materiality, amounting to £8.7 million (2021: £10.1 million) for the group
financial statements.
In determining the performance materiality, we considered a number of factors – the history of misstatements, risk assessment and ag-
gregation 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 £582k
(2021: £673k) as well as misstatements below that amount that, in our view, warranted reporting for qualitative reasons.
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46 | Balanced Commercial Property Trust Limited
Auditor’s Report
Reporting on other information
The other information comprises all the information included in the 2022 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.
• 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.
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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.
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 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 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.
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48 | Balanced Commercial Property Trust Limited
Auditor’s Report
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.
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
18 April 2023
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Consolidated Statement of
Comprehensive Income
For the year ended 31 December
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.
The accompanying notes on pages 53 to 70 are an integral part of the above statement.
2022
£’000
2021
£’000
2
Revenue
Rental income
Other income
Total revenue 58,718 58,851
9
9
(Losses)/gains on investments properties
Unrealised (losses)/gains on revaluation of investment properties
(Losses)/gains on sale of investment properties realised
(129,096 )
(5 )
Total (loss)/income (70,383 ) 180,224
3
4
Expenditure
Investment management fee
Other expenses
(6,861 )
(6,479 )
(7,195 )
(4,540 )
Total expenditure (13,340 ) (11,735 )
Operating (loss)/profit before finance costs and taxation (83,723 ) 168,489
5
Net finance costs
Interest income
Finance costs
(11,116 )
(11,140 )
(10,309 ) (11,139 )
6
(Loss)/profit before taxation
Taxation
(94,032 )
(345 )
(1,327 )
(Loss)/profit for the year (94,377 ) 156,023
13
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)/income for the year (93,654 ) 156,567
7
Basic and diluted earnings per share (13.1 19.8
Notes
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50 | Balanced Commercial Property Trust Limited
Financial Report
Consolidated
Balance Sheet
As at 31 December
Notes
2022
£’000
2021
£’000
9
10
13
Non-current assets
Investment properties
Trade and other receivables
Interest rate swap asset
10
13
11
Current assets
Trade and other receivables
Interest rate swap asset
Cash and cash equivalents
Total assets 1,164,132 1,347,184
12
13
13
Current liabilities
Trade and other payables
Interest rate swap liability
Interest-bearing loan
(21,140 )
(49,889 )
(18,448 )
(159 )
(71,029 ) (18,607 )
12
13
Non-current liabilities
Trade and other payables
Interest-bearing loans
(2,250 )
(259,388 )
(2,416 )
(308,641 )
(261,638 ) (311,057 )
Total liabilities (332,667 ) (329,664 )
Net assets 831,465 1,017,520
14
Represented by:
Share capital
Special reserve
Capital reserve – investments sold
Capital reserve – investments held
Hedging reserve
Revenue reserve
Equity shareholders’ funds 831,465 1,017,520
15
Net asset value per share 118.5 p 135.1 p
The consolidated financial statements on pages 49 to 70 were approved by the Board of Directors on 18 April 2023 and
signed on its behalf by:
P Marcuse, Director
The accompanying notes on pages 53 to 70 are an integral part of the above statement.
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The accompanying notes on pages 53 to 70 are an integral part of the above statement.
Consolidated Statement of
Changes in Equity
For the year ended 31 December 2022
Share
Capital
£’000
Special
Reserve
£’000
Capital
Reserve –
Investments
Sold
£’000
Capital
Reserve –
Investments
Held
£’000
Hedging
Reserve
£’000
Revenue
Reserve
£’000
Total
£’000
13
9
9
At 1 January 2022
Total comprehensive income for the year
Loss for the year
Movement in fair value of interest rate swap
Transfer in respect of unrealised losses on investment properties
Losses on sale of investment properties realised
(5 )
(129,096 )
(94,377 )
(94,377 )
Total comprehensive income for the year
(5 ) (129,096 ) 723 34,724 (93,654 )
14
14
8
Transactions with owners of the Company
recognised directly in equity
Transfer from share capital to special reserve
Buybacks to Treasury
Dividends paid
(463 )
(58,510 )
(33,891 )
(58,510 )
(33,891 )
At 31 December 2022 7,994
Notes
Share
Capital
£’000
Special
Reserve
£’000
Capital
Reserve –
Investments
Sold
£’000
Capital
Reserve –
Investments
Held
£’000
Hedging
Reserve
£’000
Revenue
Reserve
£’000
Total
£’000
13
9
9
9
At 1 January 2021
Total comprehensive income for the year
Profit for the year
Movement in fair value of interest rate swap
Transfer in respect of unrealised gains on investment properties
Gains on sale of investment properties realised
Transfer of prior years’ revaluation to realised reserve
(16,720 )
(57,333 )
(237 )
(86,976 )
(34,397 )
Total comprehensive income for the year
14
8
Transactions with owners of the Company
recognised directly in equity
Buybacks to Treasury
Dividends paid
(463 )
(44,780 )
(33,448 )
(45,243 )
(33,448 )
At 31 December 2021 7,531
Notes
For the year ended 31 December 2021
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52 | Balanced Commercial Property Trust Limited
Financial Report
Consolidated Statement of
Cash Flows
The accompanying notes on pages 53 to 70 are an integral part of the above statement.
2022
£’000
2021
£’000
5
9
9
Cash flows from operating activities
(Loss)/profit before taxation
Adjustments for:
Finance costs
Interest income
Unrealised losses/(gains) on revaluation of investment properties
Losses/(gains) on sale of investment properties realised
(Increase)/decrease in operating trade and other receivables
Increase/(decrease) in operating trade and other payables
(94,032 )
(807 )
(5,032 )
(1 )
(86,976 )
(34,397 )
(4,761 )
Cash generated from operations
Interest received
Interest and bank fees paid
Taxation paid
(10,987 )
(345 )
(10,063 )
(1,327 )
(10,525 ) (11,389 )
Net cash inflow from operating activities 33,233 35,131
9
9
Cash flows from investing activities
Purchase of investment properties
Sale of investment properties
Capital expenditure on investment properties
(812 )
(23,258 )
(50,821 )
(4,050 )
Net cash (outflow)/inflow from investing activities (24,070 ) 147,049
8
14
Cash flows from financing activities
Dividends paid
Issue costs for Barclays £100m loan facility extension
Buybacks to Treasury
(33,891 )
(6 )
(58,510 )
(33,448 )
(304 )
(45,243 )
Net cash outflow from financing activities (92,407 ) (78,995 )
Net (decrease)/increase in cash and cash equivalents
Cash and cash equivalents at the beginning of the year
(83,244 )
11
Cash and cash equivalents at the end of the year
Notes
For the year ended 31 December
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70 | Balanced Commercial Property Trust Limited
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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 2022 are shown below:
Gross Commitment
Leverage exposure method method
Maximum limit 300% 300%
Actual 129% 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
AIFM Disclosure
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72 | Balanced Commercial Property Trust Limited
Notice of Annual General Meeting
Notice is hereby given that the Annual General Meeting of Balanced Commercial Property Trust Limited will be held at the offices of
Columbia Threadneedle Investments, Exchange House, Primrose Street, London, EC2A 2NY on Wednesday 31 May 2023 at 2.00 pm. 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 2022 be received and adopted.
2. That the Director's Remuneration Policy be approved.
3. That the Directors’ Remuneration Report as set out in the Annual Report for the year ended 31 December 2022 be approved.
4. That the dividend policy as set out in the Annual Report be approved.
5. That Mr J Wythe, who retires annually, be re-elected as a Director.
6. That Mr P Marcuse, who retires annually, be re-elected as a Director.
7. That Mrs L Wilding, who retires annually, be re-elected as a Director.
8. That Mr H Scott-Barrett, who retires annually, be re-elected as a Director.
9. That Ms I Sharp be elected as a Director.
10. That PricewaterhouseCoopers CI LLP be re-appointed as auditor.
11. That the Directors be authorised to determine the auditor’s remuneration.
12. 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 17 April 2023 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:
13. 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
(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 17 April 2023.
Notice of Annual General Meeting
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Notice of Annual General Meeting
14. 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
18 April 2023
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 2.00 pm on 26 May 2023.
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 26 May 2023. 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 17 April 2023, 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.
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74 | Balanced Commercial Property Trust Limited
London, 2/4 King Street
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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.
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76 | Balanced Commercial Property Trust Limited
Other Information
Net asset Earnings Dividends
Total value per Ordinary per per
assets less Shareholders’ Ordinary Share Premium/ Ordinary Ordinary Ongoing
current liabilities funds Share price (discount) Share Share charges*
£’000 £’000 p p % p p %
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
* 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 2023/2024
31 May 2023 Annual General Meeting
September 2023 Announcement of interim results
Posting of Interim Report
April 2024 Announcement of annual results
Posting of Annual Report
Historic Record
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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.
2022 2021
pence pence
Net Asset Value per share (a) 118.5 135.1
Share price per share (b) 88.5 105.0
Discount (c = (b-a)/a) (c) (25.3)% (22.3)%
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.
2022 2021
£'000 £'000
(Loss)/profit for the year (94,377) 156,023
Add back: Unrealised losses/(gains) on revaluation of investment properties 129,096 (86,976)
Losses/(gains) on sales of investment properties realised 5 (34,397)
Capital and rental lease incentives amortisation 155 5,575
Interest bearing loans amortisation of set-up costs 642 642
Profit before investment gains and losses and amortisation (a) 35,521 40,867
Dividends (b) 33,891 33,448
Dividend Cover on a cash basis (c = a/b) (c) 104.8% 122.2%
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.
2022 2021
£'000 £'000
(Loss)/profit for the year (94,377) 156,023
Add back: Unrealised losses/(gains) on revaluation of investment properties 129,096 (86,976)
Losses/(gains) on sales of investment properties realised 5 (34,397)
Other income (42) (3,008)
Profit before investment gains and losses (a) 34,682 31,642
Dividends (b) 33,891 33,448
Accounting Dividend Cover (c = a/b) (c) 102.3% 94.6%
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.
Alternative Performance Measures
Net Gearing – Borrowings less cash divided by total assets (less current liabilities and cash excluding current Barclays loan).
2022 2021
£'000 £'000
Interest bearing loans 310,000 310,000
Less cash and cash equivalents (54,837) (138,081)
Total (a) 255,163 171,919
Total assets less current liabilities and cash excluding current Barclays loan (b) 1,088,155 1,190,496
Net Gearing (c = a/b) (c) 23.4% 14.4%
Overview Strategic Report Governance Report Auditor’s Report Financial Report Notice of AGM Other Information
78 | Balanced Commercial Property Trust Limited
Other Information
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.
2022 2021
£'000 £'000
Investment management fee (note 3) 6,861 7,195
Other expenses 6,479 4,540
Less non-recurring costs - impairment provision (note 4) 478 1,103
Less other non-recurring costs (30) –
Total (a) 13,788 12,838
Average net assets (b) 991,293 982,789
Ongoing Charges (c = a/b) (c) 1.39% 1.31%
2022 2021
£'000 £'000
Investment management fee (note 3) 6,861 7,195
Other expenses 6,479 4,540
Less direct operating property costs (note 4) (5,255) (3,996)
Less non-recurring costs - impairment provision (note 4) 478 1,103
Less other non-recurring costs (30) –
Total (a) 8,533 8,842
Average net assets (b) 991,293 982,789
Ongoing Charges excluding direct operating property costs (c = a/b) (c) 0.86% 0.90%
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.
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.
2022 2021
NAV per share at start of year – pence 135.1 117.5
NAV per share at end of year – pence 118.5 135.1
Change in the year –12.3% +15.0%
Impact of dividend reinvestments +3.1% +3.9%
NAV total return for the year –9.2% +18.9%
2022 2021
Share price per share at start of year – pence 105.0 80.0
Share price per share at end of year – pence 88.5 105.0
Change in the year –15.7% +31.3%
Impact of dividend reinvestments +4.0% +6.5%
Share price total return for the year –11.7% +37.8%
Strategic Report
Strategic Report Governance Report Financial Report AGM
Other Information
Chairman’s statementOverview Auditors’ Report
2022 Annual Report and Consolidated Financial Statements | 79
Strategic Report Governance Report Financial Report Notice of AGM
Other Information
Chairman’s statementOverview Auditor’s Report
Other Information
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 2022 2021
EPRA NRV (£'000) 1 904,160 1,097,910
EPRA NRV (pence per share) 1 128.9 145.8
EPRA NTA (£'000) 1 830,435 1,017,213
EPRA NTA (pence per share) 1 118.4 135.1
EPRA NDV (£'000) 1 821,423 1,004,054
EPRA NDV (pence per share) 1 117.1 133.3
EPRA earnings (£'000) 2 34,724 34,650
EPRA earnings per share (pence per share) 2 4.8 4.4
EPRA Net Initial Yield 3 4.6% 4.6%
EPRA topped-up Net Initial Yield 3 4.9% 4.4%
EPRA Vacancy Rate 4 5.9% 2.0%
EPRA Cost Ratios - including direct vacancy costs 5 22.4% 21.1%
EPRA Cost Ratios - excluding direct vacancy costs 5 19.5% 18.1%
Capital expenditure (£'000) 6 23,697 55,740
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.
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 assets per share (pence per share) 128.9 118.4 117.1
Overview Strategic Report Governance Report Auditor’s Report Financial Report Notice of AGM Other Information
80 | Balanced Commercial Property Trust Limited
Other Information
2021
EPRA
NRV
£'000
2021
EPRA
NTA
£'000
2021
EPRA
NDV
£'000
IFRS Net Asset Value 1,017,520 1,017,520 1,017,520
Fair value of interest rate swaps (307) (307) –
Fair value of debt – – (13,466)
Purchasers' costs 80,697 – –
Net assets used in per share calculation 1,097,910 1,017, 213 1,004,054
Shares in issue (000's) 753,107 753,107 753,107
EPRA earnings per share (pence per share) 145.8 135.1 133.3
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.
2022 2021
£'000 £'000
(Loss)/profit for the year per IFRS income statement (94,377) 156,023
Exclude:
Unrealised losses/(gains) on revaluation of investment properties 129,096 (86,976)
Losses/(gains) on sale of investment properties realised 5 (34,397)
EPRA earnings 34,724 34,650
Weighted average number of shares in issue (000's) 720,956 786,826
EPRA earnings per share (pence per share) 4.8 4.4
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.
2022 2021
£'000 £'000
Investment property valuation 1,097,100 1,200,842
Allowance for estimated purchasers' costs 73,725 80,697
Grossed up property portfolio valuation (a) 1,170,825 1,281,539
Annualised cash passing rental income 59,012 62,708
Property outgoings (5,255) (3,996)
Annualised net rents (b) 53,757 58,712
Add: notional rent expiration of rent free periods or other lease incentives 3,737 (2,232)
Topped-up net annualised rent (c) 57,494 56,480
EPRA NIY b/a 4.6% 4.6%
EPRA topped-up NIY c/a 4.9% 4.4%
Strategic Report
Strategic Report Governance Report Financial Report AGM
Other Information
Chairman’s statementOverview Auditors’ Report
2022 Annual Report and Consolidated Financial Statements | 81
Strategic Report Governance Report Financial Report Notice of AGM
Other Information
Chairman’s statementOverview Auditor’s Report
Other Information
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.
2022 2021
£'000 £'000
Annualised potential rental value of vacant premises 3,940 1,287
Annualised potential rental value for the complete property portfolio 66,711 64,776
EPRA Vacancy rate 5.9% 2.0%
5) EPRA cost ratio – EPRA cost ratio reflects the overheads and operating costs as a percentage of the gross rental income.
2022 2021
£'000 £'000
Total expenditure per IFRS Income Statement 13,340 12,838
EPRA costs (including direct vacancy costs) (a) 13,340 12,838
Direct vacancy costs 1,709 1,837
EPRA costs (excluding direct vacancy costs) (b) 11,631 11,001
Gross Rental Income less ground rent costs per Income Statement (c) 59,497 60,787
EPRA cost ratio (including direct vacancy costs) a/c 22.4% 21.1%
EPRA cost ratio (excluding direct vacancy costs) b/c 19.5% 18.1%
No operating costs or overheads were capitalised in 2022 (2021: nil).
6) Capital expenditure
2022 2021
£'000 £'000
Acquisitions 387 46,056
Development 52 5,634
No incremental lettable space 3,930 2,887
Incremental lettable space 19,328 1,163
Total capital expenditure 23,697 55,740
The Company has no interests in joint ventures.
Overview Strategic Report Governance Report Auditor’s Report Financial Report Notice of AGM Other Information
82 | Balanced Commercial Property Trust Limited
Glossary of Terms
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 1 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.
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
2022 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.
Other Information
Strategic Report
Strategic Report Governance Report Financial Report AGM
Other Information
Chairman’s statementOverview Auditors’ Report
2022 Annual Report and Consolidated Financial Statements | 83
Other Information
Strategic Report Governance Report Financial Report Notice of AGM
Other Information
Chairman’s statementOverview Auditor’s Report
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.
Property Terms
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 check font should be ERV.
Overview Strategic Report Governance Report Auditor’s Report Financial Report Notice of AGM Other Information
84 | Balanced Commercial Property Trust Limited
Other Information
How to Invest
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.
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 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.
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.
One of the most convenient ways to invest in <Trust Name> is through one of the savings plans run by Columbia
Threadneedle Investments.
How to Invest
Charges
Annual management charges and other charges apply according to
the type of plan.
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, these
can be found at ctinvest.co.uk/documents.
How to Invest
To open a new Columbia Threadneedle Investments plan, apply
online at ctinvest.co.uk Online applications are not available if
you are transferring an existing plan with another provider to
Columbia Threadneedle Investments, or if you are applying for
a new plan in more than one name but paper applications are
available at ctinvest.co.uk/documents or by contacting Columbia
ThreadneedleInvestments.
New Customers
Call: 0800 136 420** (8.30am – 5.30pm, weekdays)
Email: invest@columbiathreadneedle.com
Existing 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
*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.
To find out more, visit ctinvest.co.uk
0345 600 3030, 9.00am – 5.00pm, weekdays, calls may be recorded or
monitored for training and quality purposes.
© 2022 Columbia Threadneedle Investments. Columbia Threadneedle Investments is the global brand name of the Columbia and Threadneedle group of companies. Financial promotions are issued for
marketing and information purposes by Columbia Threadneedle Management Limited, authorised and regulated in the UK by the Financial Conduct Authority. 195600 UK
Financial promotion
195600_CTI BD1_How to Invest L56_v7.indd 1195600_CTI BD1_How to Invest L56_v7.indd 1 21/07/2022 11:29:4121/07/2022 11:29:41
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 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.
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.
One of the most convenient ways to invest in <Trust Name> is through one of the savings plans run by Columbia
Threadneedle Investments.
How to Invest
Charges
Annual management charges and other charges apply according to
the type of plan.
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, these
can be found at ctinvest.co.uk/documents.
How to Invest
To open a new Columbia Threadneedle Investments plan, apply
online at ctinvest.co.uk Online applications are not available if
you are transferring an existing plan with another provider to
Columbia Threadneedle Investments, or if you are applying for
a new plan in more than one name but paper applications are
available at ctinvest.co.uk/documents or by contacting Columbia
ThreadneedleInvestments.
New Customers
Call: 0800 136 420** (8.30am – 5.30pm, weekdays)
Email: invest@columbiathreadneedle.com
Existing 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
*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.
To find out more, visit ctinvest.co.uk
0345 600 3030, 9.00am – 5.00pm, weekdays, calls may be recorded or
monitored for training and quality purposes.
© 2022 Columbia Threadneedle Investments. Columbia Threadneedle Investments is the global brand name of the Columbia and Threadneedle group of companies. Financial promotions are issued for
marketing and information purposes by Columbia Threadneedle Management Limited, authorised and regulated in the UK by the Financial Conduct Authority. 195600 UK
Financial promotion
195600_CTI BD1_How to Invest L56_v7.indd 1195600_CTI BD1_How to Invest L56_v7.indd 1 21/07/2022 11:29:4121/07/2022 11:29:41
2023
Corporate Information
Directors (all non-executive)
Paul Marcuse (Chairman) *
Trudi Clark
#
Isobel Sharp (appointed 8 November 2022)
Hugh Scott-Barrett
‡
John Wythe
†
Linda Wilding
+
Secretary
Northern Trust International Fund
Administration Services
(Guernsey) Limited
PO Box 255
Trafalgar Court
Les Banques
St. Peter Port
Guernsey
Channel Islands GY1 3QL
+44 1481 745001
Alternative Investment Fund Manager
(‘AIFM’) and Investment Managers
Columbia Threadneedle Investment Business
Limited
6th Floor
Quartermile 4
7a Nightingale Way
Edinburgh EH3 9EG
+44 207 628 8000
Property Managers
Columbia Threadneedle REP AM plc
7 Seymour Street
London W1H 7JW
Property Valuers
CBRE Limited
Henrietta House
Henrietta Place
London W1G 0NB
Auditor
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
Broker and Financial Adviser
Winterflood Securities Limited
The Atrium Building
Cannon Bridge House
25 Dowgate Hill
London EC4R 2GA
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
Other Information
2022 Annual Report and Consolidated Financial Statements | 85
Balanced Commercial Property Trust Limited
2022 Annual Report and
Consolidated Financial Statements
Registered office:
+44 1481 745001
Registrars:
Computershare Investor Services (Guernsey) Limited
c/o Queensway House, Hilgrove Street,
St. Helier, Jersey, Channel Islands JE1 1ES
© 2023 Columbia Threadneedle Investments. Columbia Threadneedle Investments is the global brand name of the Columbia and Threadneedle group of companies.
To find out more visit columbiathreadneedle.com