Ground Rents Income Fund
plc
Unaudited Portfolio Valuation
as at 31 March 2024
Ground Rents Income Fund plc (the
'Company') announces the unaudited independent valuation of the
underlying portfolio as at 31 March 2024 of £81.5 million, prepared
by Savills Advisory Services Limited ('Savills'). This
reflects a like-for-like reduction (net of disposals) of £26.5
million or -24.6% compared with the last reported independent
valuation as at 31 March 2023 of £110.9 million, and a
like-for-like reduction (net of disposals) of £21.3 million or
-20.7% compared with the previously unannounced independent
valuation as at 30 September 2023 of £106.1 million. 97% of the
portfolio valuation is subject to the industry-wide Material
Valuation Uncertainty Clause because of uncertainty relating to
both leasehold reform and building safety reform.
The valuation reduction follows the
November 2023 UK Government consultation regarding restricting the
level of ground rent which leaseholders in England and Wales pay
for existing residential leases, including the Government's stated
intention not to pay compensation to freeholders. This
consultation represented a significant shift in the Government's
approach to leasehold reform and has led to a pause in market
activity and negatively impacted values. Since the Government
consultation was announced in November 2023, and as previously
announced to shareholders, the Company has worked with industry
peers and advisors to prepare a comprehensive response, which was
submitted in line with the consultation timetable on 17 January
2024. The potential outcome of legislative change following the
Government consultation remains uncertain, and the Company will
continue to keep shareholders advised of material
developments.
The Savills valuation as at 31 March
2024 of assets charged to the Company's lender, Santander, is £42.5
million, which compares with the independent bank valuation used
for the recently completed loan refinancing of £53.6 million, a
difference of -£11.1 million or -20.7%. The bank valuation
was also subject to the Material Valuation Uncertainty Clause, with
the difference reflecting the challenge of valuing in a market
impacted by negative sentiment relating to proposed leasehold
reform, and the resultant lack of comparable evidence. The
loan to value of the Santander facility, adopting the Savills
valuation, is 45.8% (36.4% based on the bank's independent
valuation when the refinancing was completed in March 2024), which
compares with a loan to value covenant ratio of 50%. The
group loan to value, net of cash, based on the Savills valuation of
the whole portfolio is 17.9%.
The recent refinancing with
Santander included adding new assets to the security pool and all
proceeds from any future sales will be used to repay the loan
facility. The new loan facility also requires amortisation of
£62,500 per quarter from January 2025. The Company aims to
progress further disposals, however there can be no guarantee that
disposals will take place, given the market uncertainty relating to
leasehold reform.
Further detail on the unaudited
independent valuation as at 31 March 2024 will be included within
the forthcoming audited year end results to 30 September 2023, due
to be released before the end of June.
This announcement contains inside information for the purposes
of the UK version of the Market Abuse Regulation ("MAR") which
forms part of UK law by virtue of the European Union (Withdrawal)
Act 2018; as amended. Upon publication of this announcement,
the inside information is now considered to be in the public domain
for the purposes of MAR.
For
further information:
Schroder Real Estate Investment
Management Limited
Nick Montgomery / Chris Leek /
Matthew Riley
|
020 7658 6000
|
|
|
Singer Capital Markets (Broker)
James Maxwell / Alaina
Wong
|
020 7496 3000
|
Appleby Securities (Channel Islands) Limited
(Sponsor)
Michael Davies
|
01534 888 777
|
FTI
Consulting
Richard Gotla / Dido Laurimore /
Oliver Parsons
|
020 3727 1000
|
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
reform 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.
On 9 November 2023, the Government
published a consultation on restricting the level of ground rent
which leaseholders in England and Wales pay for existing
leases. The consultation represents a significant shift in
the Government's approach to leasehold reform and could have a
materially adverse impact on the value of the Company's underlying
portfolio. The Company submitted a comprehensive response to
the consultation on 17 January 2024 and has kept shareholders
informed of this consultation, including through regulatory
announcements made on 20 November 2023 and 16 February 2024, which
can be found at: www.groundrentsincomefund.com
The potential outcome and timing of
further legislative change following the Government consultation
remains highly uncertain, and the Company will notify shareholders
when there is further clarity.
Due to ongoing work relating to
leasehold and building safety reform, the Company has delayed the
release of its year-end audited accounts from early 2024 to during
the quarter ending 30 June 2024. This extension has been
approved by Companies House and TISE. The Company expects to
hold a separate Extraordinary General Meeting in advance of 30 June
2024, at which the Accounts will be presented to shareholders and
shareholder resolutions relating to the Accounts will be
proposed.
Please see the Company's website for
more information:
www.groundrentsincomefund.com