Next REIT to go? Balanced Commercial Property joins long list mulling sale

The Balanced Commercial Property Trust has joined the long list of real estate investment trusts (REIT) mulling a potential sale, as it suffers from a continued discount.

In a stock exchange announcement today, Balanced Commercial Property’s board said it would be kicking off a strategic review to consider the future of the trust.

The trust joins the various other REITs moving to sell or merge with peers, a phenomenon that has begun to spread throughout the sector in recent months.

The move comes after Balanced Commercial Property has traded at a persistent discount to its net asset value. It currently sits on a discount of 27.9 per cent, and has been on a double digit discount for the last five years.

The trust’s share price rose 0.7 per cent this morning on the news.

Despite the discount, Balanced Commercial Property’s board noted that it had outperformed its benchmark index, the MSCI UK Quarterly Property index, on a total return basis over one and three years, and since it began.

The move also comes in advance of the trust’s continuation vote, where shareholders will vote on whether the trust should continue running, which the board indicated had pushed it towards beginning the review.

In recent months, the trust had already begun to actively shift the portfolio away from structurally challenged sectors, selling off its offices as the sector has struggled.

In February, it sold off its most valuable office, albeit at a six per cent discount to the valuation it received in December.

Liberum analyst Shonil Chande said that given the consolidation climate and volatile retail sector, it was “not surprising” that the trust had come out publicly saying it is considering a sale.

“29 per cent of the portfolio was based in London and over 50 per cent was in the South-East overall,” he noted.

Paul Marcuse, chair of Balanced Commercial Property, said that the decision came following “a very challenging period for REITs during the Covid-19 pandemic and subsequent economic and geopolitical events”.

“In line with our commitment to do the right thing for our shareholders as a whole, we have commenced this strategic review to determine the best way to enhance value for shareholders, after which the independent board will determine the best way forward,” Marcuse said.

The strategic review is expected to be completed in the third quarter of this year.