Balanced Commercial Property Trust Ltd (LON:BCPT) has announced the successful sale of two further office assets, 7 Birchin Lane, London and 82 King Street, Manchester, as part of the Company’s stated strategy to reduce the portfolio’s exposure to the office sector.
Following these sales, BCPT’s portfolio exposure to the office sector has reduced to 17.8% by capital value (based on 31 March 2024 valuations), down from 29.6% as at 30 June 2023. BCPT has now completed 6 office disposals since the beginning of December 2023, raising aggregate sales proceeds of £110.52 million at an average discount to the preceding valuations of 4.4%. The proceeds from these sales have allowed BCPT to repay its revolving credit facility in full and it will have cash in excess of £100m on completion of these sales.
In addition, BCPT announces that it has secured four new leases at St Christopher’s Place with the aim of capitalising on strong fundamentals and growing demand in the food and beverage (‘F&B’) sector.
Strategic disposals of offices in London and Manchester
These selective disposals follow competitive bidding processes and are in continuance of BCPT’s portfolio rebalancing strategy, which was announced in September 2023. The strategy is designed to reduce the Company’s exposure to the more challenging office sector and increase the portfolio’s alignment to growth sectors and assets, making it more attractive for investors, whilst also strengthening the Company’s balance sheet.
Since the beginning of December 2023, BCPT has announced the disposal of four office holdings and, as part of this wider strategy, the Company has also now disposed of 7 Birchin Lane, London, the Company’s only City of London holding, and separately exchanged contracts for the sale of 82 King Street, Manchester for a combined consideration of £41.65 million, representing an average discount to the 31 March 2024 independent valuations of 7.2%.
The sale of 7 Birchin Lane, which extends to 22,300 sq. ft. and is multi-let to 10 tenants, has completed following the successful delivery of the asset’s business plan. A cyclical refurbishment of the suites to enhance ESG credentials and rental values was completed, with the final refurbished suite having been relet in April 2024.
82 King Street, Manchester is a capital intensive, multi-let city-centre office holding of 83,500 sq. ft. and the largest single office holding remaining in the portfolio. The fully-occupied building comprises 19 separate commercial demises within a Grade I listed former banking hall alongside a tower constructed in 1996. The contracts for the sale have been exchanged with completion due in September 2024.
Leasing activity at St Christopher’s Place reflecting growing demand in the F&B sector
The Company’s flagship asset, St Christopher’s Place 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.
Over the past twelve months, Balanced Commercial Property Trust has successfully rebalanced the tenant mix by repurposing traditional retail units to place F&B, an attractive and growing sector, at the heart of the estate’s offering. Between March 2023 and March 2024, the estate’s exposure to the F&B sector grew to 42% from 32% by capital value, with further F&B lettings in the pipeline.
The Company’s investment manager believes that the estate’s focus on F&B will drive investment fundamentals with superior rents, longer leases and improved capitalisation rates, while also enhancing the consumer experience and occupier dynamics of the estate by extending dwell time, consumer spend and active trading hours.
As part of this strategy, BCPT has exchanged an agreement for lease at 10/12 James Street and 13/14 Gees Court with Sunday in Brooklyn, a modern American restaurant serving brunch and dinner. Sunday in Brooklyn will occupy a newly created anchor unit running from James Street through to Gees Court, which will revitalise two key entrance points to the estate. A full fit out of the unit is currently underway and the official opening is imminent.
BCPT has also exchanged an agreement for lease with Noreen, a new Middle Eastern restaurant concept, at 28-32 St Christopher’s Place, a substantial double-fronted unit in the heart of the estate. In addition, Bar Kroketa, a Spanish restaurant and bar concept, and Morena, an all-day dining concept with a Latin-American inspired menu, have both agreed new leases.
Richard Kirby, Fund Manager of Balanced Commercial Property Trust, said:
“We have now disposed of six office holdings since December 2023 and these two office sales were at an opportune point in the asset life cycle to optimise exit value. The pricing achieved further underlines the liquidity in the portfolio, despite the challenging market backdrop for the office sector.”
“The F&B sector has proven itself to be highly resilient in recent years and an increasingly attractive sub-sector of the market for investors. The Company’s flagship asset is well-positioned to take advantage of these trends. St Christopher’s Place endured a challenging time during the pandemic but I am pleased to see the buoyant levels of activity at the estate, signalling the estate moving from recovery into a growth phase.”
