REG - Ground Rents Inc Fnd - Unaudited Portfolio Valuation as at 31 March 2024

Ground Rents Income FundAnnouncement

24/04/2024 07:00

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RNS Number : 7619L  Ground Rents Income Fund PLC  24 April 2024

 

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           020 7658 6000

 Nick Montgomery / Chris Leek / Matthew Riley

 Singer Capital Markets (Broker)                              020 7496 3000

 James Maxwell / Alaina Wong
 Appleby Securities (Channel Islands) Limited (Sponsor)       01534 888 777

 Michael Davies
 FTI Consulting                                               020 3727 1000

 Richard Gotla / Dido Laurimore / Oliver Parsons

 

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
(http://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 (http://www.groundrentsincomefund.com/)

 

 

 

 

 

 

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