Ground Rents Inc Fnd - Disposal of largest asset

Ground Rents Income Fund

19/11/2024 12:17

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RNS Number : 8290M  Ground Rents Income Fund PLC  19 November 2024

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 (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 (http://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 (http://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.

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