THIS
ANNOUNCEMENT CONTAINS INSIDE INFORMATION FOR THE PURPOSES OF
ARTICLE 7 OF EU REGULATION 596/2014 (WHICH FORMS PART OF DOMESTIC
UK LAW PURSUANT TO THE EUROPEAN UNION (WITHDRAWAL) ACT 2018
("EUWA")) ("UK MAR"). UPON THE PUBLICATION OF THIS ANNOUNCEMENT VIA
A REGULATORY INFORMATION SERVICE, SUCH INSIDE INFORMATION (AS
DEFINED IN UK MAR) IS NOW CONSIDERED TO BE IN THE PUBLIC
DOMAIN.
19 November 2024
Ground Rents Income Fund plc ('GRIO' or
the 'Company')
DISPOSAL OF LARGEST
ASSET
Ground Rents Income Fund plc announces the sale
of its largest asset, a freehold ground rent interest at Lawrence
Street in York, for a price of £7.9 million. This price is in
line with the unaudited independent portfolio valuation as at 30
September 2024 and reflects a net initial yield of 4.2% based on
the current annual rent of £356,455. The asset is operated by
Vita Student as purpose built student accommodation, and has been
acquired by the long leaseholder. The disposal is in line
with the Company's new Investment Policy to sell assets where
possible to optimise the net realisation value of the Company's
investments.
The asset formed part of the security for the
Company's loan from Santander UK plc ('Santander'). The new
loan terms, agreed as part of a refinancing in March 2024, require
all proceeds from charged asset disposals to be used to repay
debt. Following the loan repayment and based on the unaudited
independent portfolio valuation as at 30 September 2024, the value
of the remaining assets charged to Santander total £31.1 million
and the bank Loan to Value ('LTV') will be approximately 38.6%
compared with a LTV covenant ratio of 50%. The consolidated
group LTV following the repayment will be approximately
18.9%.
On the same basis, the Interest Cover Ratio
('ICR') will be approximately 495% compared with a ICR ratio
covenant of 200%. As set out in the circular issued on 24
October relating to the continuation of the Company (https://schro.link/griocircular),
the current preferential interest rate hedging expires in January
2025, prior to the loan maturing in July 2026. Following
expiry of the hedging, and assuming the current SONIA rate of 4.7%,
the ICR would be approximately 238% compared with a reduced
covenant level, effective from January 2025, of 160%.
Further assets are being marketed for disposal
and a full update on progress implementing the new Investment
Policy will be included in the forthcoming year-end results that
the Company aims to release in December.
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Enquiries:
Schroder Real Estate Investment Management
Limited
Matthew Riley / Chris Leek
020 7658 6000
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
FTI Consulting
Richard Gotla / Oliver Parsons
0203 727 1000
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Notes to
editors:
Ground Rents Income Fund plc is a closed-ended
real estate investment trust, listed on The International Stock
Exchange 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 the Company's
independent valuer, Savills, in conjunction with other valuers and
the Royal Institution of Chartered Surveyors, to adopt a Material
Valuation Uncertainty Clause ('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.
In July 2024, 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 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 are
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.
As set out in the recent Extraordinary General
Meeting ('EGM') notice and Circular, an EGM took place on 18
November 2024 where the Continuation Resolution was passed, with
92% of voting shareholders voting 'For' the continuation of the
Company. The next Continuation Vote will need to be held on or
before 17 November 2027.
Preparation for, and the audit of, the
Company's full year accounts for the year to 30 September 2024, has
been running in parallel with the Continuation Vote process, with
an aim to release the year-end results during December.
See the Company's website for more
information:
www.groundrentsincomefund.com
The person responsible for arranging the
release of this announcement on behalf of the Company is Matthew
Riley, a member of Company Secretarial team of the
Company.