24
July 2024
Ground
Rents Income Fund plc
HALF YEAR
RESULTS FOR THE SIX MONTHS ENDED 31 MARCH 2024
Ground Rents Income Fund plc (the
'Company') announces its unaudited half year results for the six
months ended 31 March 2024, which are available on the Company's
website www.groundrentsincomefund.com
and can be viewed at https://schro.link/griohyr2024.
Barry Gilbertson, the Company's
Chair, commented:
"The Board and
Manager remain committed to the strategic priorities of delivering
the new Investment Policy, advocating for fair leasehold reform,
and delivering best-in-class asset management.
Our efforts, and those of the wider
ground rent market sector, combined with the change of Government,
have arguably led to a better leasehold reform outcome for the
Company than contemplated by the previous Government in the
November 2023 Consultation. However, greater clarity is awaited on
the new Government's leasehold reform agenda, both in terms of
detail and priority of timing."
Key
highlights:
· As
previously announced with the delayed Annual Report to 30 September
2023 (the '2023 Annual Report'), the independent portfolio
valuation as at 31 March 2024 was £81.5 million, reflecting a
like-for-like reduction (net of disposals) of £21.3 million, or
-20.7%, over the period (30 September 2023 of £106.1
million). 97% of the portfolio valuation was subject to the
industry-wide Material Valuation Uncertainty Clause ('MUC').
The 2023 Annual Report is available at the following link
https://schro.link/grio24.
· NAV of
£66.2 million, or 69.2 pence per share ('pps') (30 September 2023:
£86.2 million or 90.1 pps). Since June 2023 the Company has been unable to pay further
dividends due to a Modified Auditors Report relating to uncertainty
regarding determining building remediation costs and a lack of
market transactional evidence.
·
Refinanced the existing £25 million loan facility
with Santander UK plc in March 2024, which was due to expire in
January 2025. The new £19.5 million facility extends the loan term
from January 2025 to July 2026 and has a margin of 2.75% per
annum.
· Group
loan to value, net of cash, of 17.9%, based on the independent
portfolio valuation as at 31 March 2024 and an effective interest
rate of 3.6% per annum.
· Completed disposal of freehold ground rent interests in
Bristol and Exeter, for a combined price of £3.45 million,
achieving a 4% premium to the 30 September 2023 independent
valuation of £3.30 million and reflecting a net initial yield of
3.1%. Further disposals are planned and in
progress.
· The
half year and since was characterised by uncertainty relating to
leasehold reform, notably the November 2023 Consultation from the
previous Government regarding restricting existing residential
ground rents payable, without compensation to freeholders.
This represented a significant shift in the Government's
approach to leasehold reform and led Savills, in conjunction with
other valuers and the Royal Institution of Chartered Surveyors, to
adopt the MUC across the entire residential ground rent
market.
· Since
November 2023 the Company worked extensively with industry peers
and advisors to prepare a comprehensive response to the
Consultation, submitted in January 2024. Political upheaval
resulted in an accelerated Leasehold and Freehold Reform Act 2024,
enacted in May, which may represent a better outcome than the
worst-case scenarios contemplated in the Consultation.
· The
Company is reviewing the new Government's manifesto commitments and
proposals for a Leasehold and Commonhold Reform Bill and will
engage positively with the new Government to advocate for reform
that fairly balances the interests of our shareholders and
leaseholders.
· During
the quarter ending 31 December 2024, the Company will convene an
Extraordinary General Meeting to hold a Continuation Vote, where
the Board and the Manager will provide an update to progress on
delivering the new Investment Policy.
Enquiries:
Schroder Real Estate Investment
Management Limited
Nick Montgomery / Chris Leek /
Matthew Riley
020 7658 6000
FTI Consulting
Richard Gotla / Dido
Laurimore
0203 727 1000 / Schroderrealestate@fticonsulting.com
Singer Capital Markets
(Broker)
James Maxwell / Alaina Wong
(Investment Banking)
Sam Greatrex (Sales)
020 7496 3000
Appleby Securities (Channel Islands)
Limited (Sponsor)
Andrew Weaver / Michael
Davies
01534 888 777
Notes to editors:
Ground Rents Income Fund plc is a
closed-ended real estate investment trust, listed on The
International Stock Exchange ('TISE') and traded on the SETSqx
platform of the London Stock Exchange.
Schroder Real Estate Investment
Management Limited (the 'Manager') was appointed as the Company's
Alternative Investment Fund Manager in May 2019 to support the
Company's Board with the headwinds related to building safety and
leasehold reform.
During the first half of 2023 the
Board and Manager carried out an extensive shareholder consultation
on proposals to change the Continuation Vote mechanism included in
the Articles dating from 2012, as well as proposed changes to the
Investment Policy. These proposals received strong support
from shareholders and resulted in a new Continuation Resolution and
Investment Policy. The new Investment Policy adopts a
strategy of realising the Company's assets in a controlled, orderly
and timely manner for shareholders, whilst continuing to deliver
best-in-class residential asset management including fairness,
transparency, and affordability for leaseholders.
In November 2023 the previous
Government published a consultation on restricting existing
residential ground rents payable, without compensation to
freeholders (the 'Consultation'). This represented a
significant shift in the Government's approach to leasehold reform
and led Savills, in conjunction with other valuers and the Royal
Institution of Chartered Surveyors, to adopt the MUC across the
entire residential ground rent market. The Company submitted a
comprehensive response to the Consultation in January 2024 and has
kept shareholders informed of the Government's leasehold reform
agenda, including various regulatory announcements, which can be
found at: www.groundrentsincomefund.com
Since November 2023, political
upheaval resulted in an accelerated Leasehold and Freehold Reform
Act 2024 (the 'Act'), enacted in May, which may represent a better
outcome than the worst-case scenarios contemplated in the
Consultation.
On 17 July, the new Government set
out its legislative priorities in the King's Speech, including a
draft Leasehold and Commonhold Reform Bill. Largely based on the
Labour Party's manifesto commitments, the new Government will seek
to implement the provisions within the Act and further reform the
leasehold system, including enacting the remaining Law Commission
recommendations relating to enfranchisement and Right to Manage,
regulate existing ground rents and, following consultation, ban the
sale of new leasehold flats so a reinvigorated commonhold legal
framework becomes the default tenure.
The potential outcome and timing of
legislative changes remains uncertain, and the Board and Manager
are working closely with the Company's advisers and other
institutional owners to better understand the Act and the King's
Speech, and look forward to engaging positively with the new
Government to advocate for reform that fairly balances the
interests of the Company's shareholders and
leaseholders.
The new Continuation Vote mechanism
requires the Company to hold a Continuation Resolution before 31
December 2024, and at three-year intervals thereafter. At each
Vote, the Resolution proposed will need a simple majority of votes
cast to pass. During the quarter ending 31 December 2024, the
Company therefore expects to convene a further EGM to hold a
Continuation Vote, where the Board and the Manager will provide an
update to progress on delivering the new Investment
Policy.
See the Company's website for more
information:
www.groundrentsincomefund.com