TIDMGRIO
RNS Number : 9337L
Ground Rents Income Fund PLC
07 October 2016
7 October 2016
GROUND RENTS INCOME FUND PLC
Proposed Changes to the Investment Policy and Notice of General
Meeting
Ground Rents Income Fund plc (the "Company") announces that it
is sending a circular (the "Circular") to Shareholders, containing
details of proposed changes to the Company's investment policy in
order to permit greater use of leverage by the Company for
investment purposes, and on a longer term basis (the
"Proposal").The Circular will be posted to Shareholders today and
will be available on the Company's website at
www.groundrentsincomefund.com
The Chairman's Letter and the Proposed Investment Policy, as
contained in the Circular, are set out below. A comparison of the
Proposed Investment Policy and the Existing Investment Policy,
showing the proposed changes, is contained in Part 2 of the
Circular.
Terms used and not defined in this announcement bear the meaning
given to them in the Circular.
Contacts:
Ground Rents Income Fund plc
Simon Wombwell (Director) 020 7499 6424
Brooks Macdonald Funds Limited
James Agar (Director) 020 7659 3454
N+1 Singer (Broker)
James Maxwell / Liz Yong 020 7496 3000
Tavistock (Media)
Jeremy Carey / James Whitmore 020 7920 3150
Appleby Securities (Channel
Islands) Limited (Sponsor)
Kate Storey / Danielle Machon 01481 755600
Dear Shareholder,
PROPOSED CHANGES TO THE COMPANY'S INVESTMENT POLICY AND NOTICE
OF GENERAL MEETING
1. Introduction
Your Board announced earlier today that it proposes to change
the Company's investment policy in order to permit greater use of
leverage by the Company for investment purposes, and on a longer
term basis (the "Proposal").
The Proposal is conditional upon the Company obtaining approval
from its Shareholders. Accordingly, your Board has convened a
general meeting, notice of which appears on pages 14 to 15 of the
Circular, to be held at 10:00 at the offices of the Company at 72
Welbeck Street, London W1G 0AY on 26 October 2016, the purpose of
which is to consider and if thought fit pass the Resolution.
The purpose of the Circular is to explain the background to and
reasons for the Proposal, the text of the Proposed Investment
Policy and to explain why the Directors consider the Proposal to be
in the best interests of the Company and the Shareholders as a
whole, and are unanimously recommending that you vote in favour of
the Resolution to be proposed at the General Meeting.
The contents of this letter are important and I would urge you
to read it carefully and to sign and return the Form of Proxy in
accordance with the instructions given on it and in paragraph 5
below headed "Action to be taken" as soon as possible.
2. The Proposal
The purpose of amending the Existing Investment Policy is to
remove the restriction on the Company's ability to make use of
structural or long-term debt facilities for investment
purposes.
Currently, the Existing Investment Policy provides a restriction
that borrowings should be used for short-term purposes only and
thus any borrowings would need to be repaid from the proceeds of
future fundraisings or asset sales.
The Board believes that the ability to utilise borrowings in
addition to equity, and to leverage assets over a longer term
period, will allow the Company to take advantage of attractively
priced debt currently available to it, and provide greater
flexibility now that the Company's equity is fully invested, to
allow the Company to move quickly to purchase good quality Ground
Rent assets, in competitive market conditions and to determine how
best to finance those investments in the longer term.
Accordingly, the Directors believe that having greater
flexibility to utilise longer term debt will place the Company in a
strong position to secure further assets for the Group. The
Investment Adviser has identified a pipeline of such assets for
consideration by the Board, which investments would otherwise be in
line with the Existing Investment Policy. It has also conducted
preliminary discussions with the Company's principal banker,
Santander plc, with a view to implementing a fixed rate, interest
only GBP26,000,000 facility for a term of five years (including
refinancing of the Group's existing c.GBP8,000,000 short-term
facility with Santander plc).
The Investment Manager has advised the Board that debt is
currently available at historically low interest rates and
therefore it should be a good time for the Group to seek to utilise
further leverage. The Directors believe that, were the Resolution
to be passed, and were new facilities to be utilised by the Group,
the use of such leverage should be accretive to the net dividend,
particularly given that the issue of new equity would be
potentially dilutive to Shareholders during the investment period
until any such further equity raise was fully invested. In
addition, a larger portfolio of Ground Rent assets acquired through
the use of any such leverage to acquire those assets identified by
the Investment Adviser should, the Directors believe, provide a
greater weighting on index linked assets for the Group.
The Existing Investment Policy restricts the use of gearing in
scale to no more than 25 per cent of the gross assets of the
Company. The Proposal does not seek to increase this restriction in
any way, but simply to allow the Company to utilise debt over a
longer term and without the need to repay any such debt from the
proceeds of future fundraisings.
The Company is not, as a REIT, subject to any express borrowing
restrictions. However, there will be a tax charge if the income
profits of the Company's Qualifying Property Rental Business do not
cover its related financing costs at least 1.25 times. Based on the
current proposals, the Directors do not believe that such a tax
charge would arise as a result of entering into the proposed
facility described above.
The Proposed Investment Policy is set out in Part 2 of the
Circular, with the proposed amendments to the Existing Investment
Policy shown by blacklining.
If the Resolution is passed, Shareholders' prior approval by
ordinary resolution would still be required for any material future
changes to the Proposed Investment Policy, including the maximum
borrowing limits.
3. AIFMD update
If the Resolution is passed, and if the Company were to utilise
additional leverage and grow its assets under management to the
extent that it could no longer qualify as a small registered AIFM
(the relevant threshold of assets under management being EUR100
million where leverage is used), then the Company would need to be
managed by a full scope AIFM under AIFMD. Accordingly, the Company
would be required to appoint an AIFM in such circumstances, in
order to comply with AIFMD. Further, upon any such appointment of
an AIFM, the Company would automatically cease to act itself as the
AIFM of the Company, and such functions would then be performed by
the external AIFM. In those circumstances, the Company expects to
appoint the Investment Adviser, which is regulated by the FCA as a
full scope AIFM. If the Company was to be required to be managed by
a full scope AIFM, the AIFM would have to ensure that the Company
complied with the requirements in the AIFMD, including appointing a
depositary and the AIFM would be subject to certain organisational,
operational and transparency obligations.
In the circumstances referred to above, the Company would
publish a CISEA supplementary listing document reflecting material
changes since the last published listing document in May 2013.
4. General Meeting
Given the Proposal outlined above, the Company is seeking the
approval of Shareholders for the material change to its investment
policy to utilise longer term debt for investment purposes.
Accordingly, a general meeting of the Company, notice of which is
set out on pages 14 to 15 of the Circular is to be held on 26
October 2016 at 10:00 a.m. at the offices of the Company at 72
Welbeck Street, London W1G 0AY for the purpose of considering and,
if thought fit, passing the Resolution. The Proposal is conditional
on the Resolution as set out in the notice of General Meeting being
passed without amendment.
A Form of Proxy for use at the General Meeting is enclosed with
the Circular (see paragraph 5 below headed "Action to be
taken").
Shareholders have the right to attend, speak and vote at the
General Meeting (or, if they are not attending the meeting, to
appoint someone else as their proxy to vote on their behalf) if
they are on the Register at the Voting Record Time (being close of
business on 24 October 2016). Changes to entries in the Register
after the Voting Record Time will be disregarded in determining the
rights of any person to attend and/or vote at the General Meeting.
If the General Meeting is adjourned, only those Shareholders on the
Register as at close of business on the day which is two days
before the date of the adjourned General Meeting will be entitled
to attend, speak and vote or to appoint a proxy.
The number of Ordinary Shares a Shareholder holds as at the
Voting Record Time will determine how many votes that Shareholder
or his/her proxy will have in the event of a poll.
Explanation of the Resolution to be proposed at the General
Meeting
The notice convening the General Meeting sets out the Resolution
which will be proposed at it. The Resolution, which will be
proposed as an ordinary resolution, approves the changes to the
Existing Investment Policy and adopts the Proposed Investment
Policy, the text of which, along with a mark-up including the
proposed changes to the Existing Investment Policy, is set out in
Part 2 of the Circular.
5. Action to be taken
A Form of Proxy for use at the General Meeting accompanies the
Circular. The Form of Proxy should be completed in accordance with
the instructions on it and returned to the Company's registrars,
Capita Asset Services, PXS, The Registry, 34 Beckenham Road,
Beckenham, Kent BR3 4TU as soon as possible but in any event so as
to be received by 10:00 on 24 October 2016. The completion and
return of a Form of Proxy will not preclude a Shareholder from
attending the General Meeting and voting in person should they so
wish.
6. Recommendation
The Directors consider the Proposal to be in the best interests
of the Company and its Shareholders as a whole and accordingly
recommend unanimously that Shareholders vote in favour of the
Resolution to be proposed at the General Meeting.
Yours faithfully
Robert Malcolm Naish
Chairman
SUMMARY OF PROPOSED INVESTMENT POLICY
Assuming that the Resolution is passed at the General Meeting,
the Company's new investment policy will be as follows.
INVESTMENT OBJECTIVE
The Company has been established to provide secure long-term
performance through investment in Long Dated UK Ground Rents, which
have historically had little correlation to traditional property
asset classes and have seen their value remain consistent
regardless of the underlying state of the economy.
The Company will give investors the opportunity to invest,
through the Company, in a portfolio of Ground Rents. The Company
will seek to acquire a portfolio of assets with the potential for
income generation from the collection of Ground Rents. These
investments also have the potential for capital growth, linked to
contractual increases in Ground Rents over the long-term.
The Company will seek to generate consistent income returns for
Shareholders by investing in a diversified portfolio of Ground
Rents including freeholds and head leases of residential, retail
and commercial properties located in the United Kingdom.
INVESTMENT POLICY
The Company will seek to benefit from the Ground Rents'
long-term cash flows, rental income from each freehold and head
leases and additional income from the obligation to arrange the
insurance of the building and, further, the ability to charge for
permissions under the lease when the leasehold ownership changes
hands. The Company will not invest in non Ground Rent instruments,
listed securities or other forms of commercial or residential
property.
The Company will invest in freeholds and head leases in the
United Kingdom. The Company intends to purchase Ground Rents where
the leasehold interests are Long Dated although shorter
opportunities will be considered if the Directors believe it is in
the best interest of the Company to do so.
Each portfolio of Long Dated Ground Rents comprising the
freeholds and head leases of residential, retail and commercial
properties in the United Kingdom will have a pre-determined
long-term income stream from the lease and, ultimately, when the
lease comes to an end, a reversionary value. The Company may also
exploit other investment opportunities which provide the Company
with Ground Rent income but may not have the right to a
reversionary value.
The Company intends that no single ground rent property should
represent more than 25 per cent of the gross asset value of the
Company at the time of investment.
The Company does not expect to engage in any hedging
transactions, although, at the sole discretion of the Directors,
the Company may utilise hedging, financial and money market
instruments in the management of its assets and risk.
The Company may reinvest both realised invested capital and any
profits that have not been distributed, subject to distributing 90
per cent of distributable income profits arising from the Group's
Qualifying Property Rental Business in each accounting year in
order to comply with the Company's REIT obligations.
The Company may make use of structural or long-term debt
facilities for investment purposes, and if a portfolio of assets
was available to be acquired in a corporate structure which had
some existing borrowings within its corporate vehicles, these may
be retained. In all cases the gearing anticipated would be limited
in scale, to no more than 25 per cent of the gross assets of the
Company.
END OF ANNOUNCEMENT
This information is provided by RNS
The company news service from the London Stock Exchange
END
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