TIDMGRIO
RNS Number : 8328V
Ground Rents Income Fund PLC
11 April 2019
For release 11 April 2019
Ground Rents Income Fund plc - Change of Investment Manager and
AIFM
The Directors of Ground Rents Income Fund plc ('GRIO' or 'the
Company') are pleased to announce the appointment of Schroder Real
Estate Investment Management Limited ('Schroders') as the
Alternative Investment Fund Manager ('AIFM'), replacing Brooks
Macdonald Funds Limited ('BMFL'). Schroders' appointment is subject
to completing the necessary Financial Conduct Authority
notification process that is expected to take one month.
Background and rationale
The previous manager, Brooks Macdonald Group, is stepping back
from managing GRIO to focus more closely on the Group's core
offerings. As part of considering the appointment of Schroders, the
Directors of GRIO (the 'Board') considered the following
advantages:
-- Large and established manager with long experience managing
listed real estate investment trusts;
-- Long-term track record of outperformance through real estate cycles;
-- The ability to retain the existing BMFL management team responsible for the GRIO mandate;
-- Strong governance and risk management processes to support
the Company dealing with regulatory and legislative change in the
sector;
-- Active asset management capabilities to deal with complex
situations such as the impact of Carillion's liquidation and
related litigation at Beetham Tower in Manchester; and
-- Simplification of the current investment management fee
arrangements so that there is greater alignment of interests
between the manager and GRIO shareholders.
The Board believes that Schroders fulfils these requirements,
which are expected to deliver the following benefits to
investors:
-- Stability - Schroders provides a stable platform for the current management team;
-- Depth of resource - Combining the current management team
with Schroders' extensive resources provides both continuity and
greater depth of experience to the GRIO mandate;
-- Experience - Schroders Group has managed real estate assets
since 1971 and manages eight UK-listed investment trusts. The Real
Estate Group manages three listed real estate investment trusts in
the UK and Continental Europe;
-- Distribution - Schroders has strong relationships with major
GRIO shareholders with an extensive distribution capability to
support the long-term growth of the Company; and
-- Performance and focus - Schroder Real Estate has a long-term
track record of outperformance.
James Agar and the existing BFML team responsible for the GRIO
mandate will be moving to Schroders. James will continue to lead
the provision of Investment Management and AIFM services to the
Company and will be supported by the transitioning BMFL team as
well as the broader Schroders infrastructure. The Board will
undertake a review of the strategy to determine the best course to
maximise sustainable shareholder total returns including a review
of the dividend policy.
Schroders appointment terms
Schroders has been appointed for an initial period of 3 years to
ensure management continuity, following which the termination
notice period will be 1 year.
The current investment management fee comprises a base component
calculated from GRIO's market capitalisation together with a number
of additional payments and commissions from third parties relating
to the management of the underlying portfolio.
Since the initial public offering in 2012, market practice has
moved towards transparent and simplified fee structures linked to
net asset value ('NAV'). As a result, the Board has agreed a
simplified, tiered fee for Schroders to provide Investment
Management and AIFM services of 1.0% of NAV per annum up to GBP200
million, payable quarterly in arrears. The fee will be 0.9% of NAV
per annum between GBP200 million and GBP400 million, and 0.8% of
NAV per annum above GBP400 million. The following provisions also
apply:
-- For the initial twelve-month period, the fee will be 0.9% of
NAV with the potential to earn up to 1.0% of NAV subject to
delivering income-enhancing initiatives;
-- Upon completing the purchase of a property which has been
introduced by Schroders, and for which no third-party introductory
fees are payable, Schroders will be entitled to receive an
acquisition fee of 1.0% of the acquisition price paid; and
-- All additional payments and commissions currently received by
BMFL in connection with managing the portfolio and providing
services to occupier and long leaseholders will be received by
GRIO.
The Board believes the revised fee structure is in line with
comparable real estate funds and aligns Schroders' remuneration to
long-term shareholder value.
Corporate Governance
The Company also wishes to draw shareholders' attention to Simon
Wombwell's, a Brooks Macdonald employee, intention to resign as a
Director following the appointment of Schroders. The exact timing
will be determined by the appointment of a new independent director
for which a search has commenced but will be no later than 30
September 2019.
The Directors will continue to take appropriate measures to
ensure that the Company complies with the UK Code on Corporate
Governance to the appropriate extent and taking into account the
size of the Company and its nature of business.
It is intended that shareholders will be updated in the coming
months on Schroders' appointment and the progress being made on
reforms to the leasehold sector. It will also allow investors to
provide strategic feedback to the manager. In the meantime, the
Board has agreed that Schroders will prepare a detailed review of
the strategy and the best sustainable investment policy in light of
the sector and characteristics of the portfolio.
Malcolm Naish, Chairman of GRIO, commented:
"The Board is delighted to announce its intention to appoint
Schroders as the Company's Investment Manager and AIFM. Schroders
has a strong track record and over the course of this process
demonstrated its commitment to the fund. As a result we believe
that Schroders combined with the current management team are well
placed to support Ground Rents Income Fund plc during the next
stage of its development".
Nick Montgomery, Schroder Real Estate Investment Management
Limited, commented:
"Ground Rents Income Fund plc's diversified portfolio of ground
rents provides long-term, stable income with high inflation-linkage
which is differentiated from other Schroders' real estate products.
We recognise the regulatory challenges that face the industry, but
believe that we have the platform to support the existing team to
continue to be a best-in-class operator in the leasehold sector as
evidenced by their commitment to the Public Pledge for
Leaseholders.
Furthermore, the residential sector is a growing part of the
institutional real estate market and the appointment fits well with
Schroders' broader Real Estate strategy to be closer to our
assets".
Contacts:
Ground Rents Income Fund PLC
Simon Wombwell 020 7499 6424
Brooks Macdonald Funds Limited
Simon Broomfield 020 7659 3401
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Schroder Real Estate Investment Management Limited
Duncan Owen / Nick Montgomery / Andy Pearce 020 7658 6000
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N+1 Singer
James Maxwell / Ben Farrow 020 7496 3000
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Tavistock (Media)
Jeremy Carey / James Whitmore 020 7920 3150
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Appleby Securities (Channel Islands) Limited
Andrew Weaver / Zim Ceko 01534 888 777
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END
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