REG - Ground Rents Inc Fnd - Refinance of Loan Facility

Ground Rents Income FundAnnouncement

02/04/2024 07:00

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RNS Number : 4131I  Ground Rents Income Fund PLC  02 April 2024

Ground Rents Income Fund plc

 

Refinance of Loan Facility

Ground Rents Income Fund plc (the 'Company') announces the refinancing of its
existing £25 million loan facility with Santander UK plc ('Santander'), which
was due to expire in January 2025. The loan was put in place in 2019,
comprising a £12.5 million term loan and a £12.5 million revolving credit
facility, with an aggregate £21 million currently drawn.

The new loan terms include:

 * A new £19.5 million facility with an extension in the loan term from January
2025 to 10 July 2026.

 * The new loan has a margin of 2.75% per annum, an increase of 90 basis points
compared to the previous margin of 1.85% per annum.

 * Existing hedging will remain in place until expiry in January 2025, consisting
of an interest rate swap on £12.5 million at 0.83% per annum and an interest
rate cap on £5.5 million at 1.00% per annum.  This results in a total
current interest rate of 4.0% per annum.  Based on the previous total loan
drawn of £21.0 million and existing hedging, the effective total current
interest rate was 3.5% per annum (inclusive of a non-utilisation fee).

 * Five assets added to the security pool for a combined value of £9.5 million,
increasing total charged assets to £53.6 million, resulting in a loan to
value ('LTV') ratio of 36.4% compared to a covenant of 50%.

 * Refinancing consistent with the strategic objective to realise assets in a
controlled, orderly, and timely manner, by providing more time to effect
disposals.  Santander's agreement to accept new assets also provides more
headroom against loan covenants.

As part of the refinancing, the Company has used £1.5 million of recent
disposal proceeds to reduce the new loan facility to a total of £19.5
million.  Santander can require all future proceeds from charged asset
disposals to be used to repay the loan facility.  The new loan facility also
requires amortisation of £62,500 per quarter from January 2025, with future
disposal proceeds net against the aggregate remaining amortisation amounts.
There are no commitment or early repayment fees.

The Board and Manager will review hedging options in advance of the existing
hedging expiring in January 2025, having regard to the outlook for interest
rates and further progress with disposals.

Including the addition of five new assets, Santander's independent external
valuation of the security pool is £53.6 million, reflecting a LTV ratio of
36.4%. This compares to a LTV covenant of 50%.  At completion the interest
cover ratio ('ICR') is 301%, which compares to a current ICR covenant ratio of
200%, with the covenant level reducing to 160% in January 2025.  Santander's
independent external valuation includes the industry wide Material Valuation
Uncertainty Clause because of uncertainty relating to both leasehold and
building safety reform.

Based on the Company's latest unaudited, published, independent portfolio
valuation as at 31 March 2023, following the refinancing the group LTV, net of
cash, is 13.8%.  The Company's remaining assets are uncharged and comprise
property assets valued at £55.2 million (as at 31 March 2023) and cash of
£4.6 million.

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

 Andrew Weaver / 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 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.

See the Company's website for more information:

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

 

 

 

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