Peter Lowe - Fund Manager
BMO Real Estate Investments Limited
The trust aims to deliver an attractive level of income together with the potential for income and capital growth from investment in a diversified UK commercial property portfolio. It offers investors prime exposure to commercial property assets.
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 and Management of Assets
The Company holds a diversified portfolio of freehold and predominantly long leasehold (over 60 years remaining at the time of acquisition) UK commercial properties. It invests principally in three commercial property sectors: office, retail and industrial.
The Company invests in income producing investments. Investment decisions are based on analysis of, amongst other things, prospects for future income and capital growth, sector and geographic prospects, tenant covenant strength, lease length, and initial and equivalent yields and the potential for development or redevelopment of the property. The Company will not invest in other investment companies or funds.
Investment risks are spread through investing in a range of sectors across the UK, and through letting properties, where possible, to low risk tenants. The Company has not set any maximum geographic exposures, but the maximum weightings in the principal property sectors (stated as a percentage of total assets) are: office: 60 per cent; retail: 60 per cent; and industrial: 50 per cent. No single property may exceed 15 per cent of total assets and the five largest properties may not exceed 45 per cent of total assets.
Income receivable from any one tenant, or tenants within the same group, in any one financial year shall not exceed 20 per cent of the total rental income of the Group in that financial year. At least 90 per cent by value of properties held shall be in the form of freehold, feuhold or long leasehold (over 60 years remaining at the time of acquisition) properties or the equivalent.
The Company uses gearing to enhance returns over the long term. Gearing, represented by borrowings as a percentage of total assets, should not exceed 60 per cent. However, it is the Board’s present intention that borrowings will be limited to a maximum of 45 per cent of total assets at the time of borrowing. The Board receives recommendations on gearing levels from the Managers and is responsible for setting the gearing range within which the Managers may operate.
The Company’s borrowings are represented by a £60 million bank loan, which is described in more detail in note 12 to the accounts.
At each Board meeting, the Board receives a detailed presentation from the Managers together with a comprehensive analysis of the performance of the Company, and compliance with investment restrictions during the reporting period.
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