REG - Ground Rents Inc Fnd - Unaudited Portfolio Valuation as at 31 March 2026

Ground Rents Income FundAnnouncement

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RNS Number : 4786A  Ground Rents Income Fund PLC  15 April 2026

15 April 2026

 

Ground Rents Income Fund plc

('GRIO' or the 'Company')

 

UNAUDITED PORTFOLIO VALUATION AS AT 31 MARCH 2026

 

Ground Rents Income Fund plc announces that Savills Advisory Services Limited
('Savills') has provided an unaudited independent valuation of the Company's
portfolio as at 31 March 2026 of £29.5 million. This represents a
like-for-like reduction over the six-month period (net of disposals) of £21.6
million or 42.3% (30 September 2025: £56.2 million or £51.1 million on a
like-for-like basis). Savills, in discussion with peers and the RICS,
continues to adopt a Material Valuation Uncertainty Clause ('MUC') that
applies across the residential ground rent market due to uncertainty relating
to leasehold reform and the resultant lack of transactional evidence.

 

Valuation metrics and rental growth

The valuation as at 31 March 2026 reflects a net initial yield of 15.8% and a
Years Purchase ('YP') multiplier of 5.9, based on annual ground rent of £5.0
million.

 

Over the six-month period, contracted rent on a like-for-like-basis increased
by 4.2%, compared with the latest available six-month change in Retail Price
Index inflation of 0.1%. Based on an illustrative assumption of 3.5% per year
inflation over the next five years, annual ground rent would increase to
approximately £6.3 million, implying a net yield on the latest valuation of
approximately 20.0%. The Company understands that Savills' valuation approach
is broadly consistent with peers.

 

Leasehold reform

The reduction in valuation primarily reflects the Government's publication in
January 2026 of the draft Commonhold and Leasehold Reform Bill (the 'Bill')
which, through amendments to the Leasehold and Freehold Reform Act 2024,
proposes capping ground rents on most long residential leases in England and
Wales at £250 per year, reducing to a peppercorn (nil value) after 40 years,
subject to the Bill becoming law and the relevant provisions coming into force
(not expected before late 2028).

 

The Company believes the proposed provisions to be unlawful and has reiterated
that any reform should be targeted and evidence-based, balancing the interests
of responsible freeholders and leaseholders while avoiding unintended
consequences such as heightened freeholder insolvency risk and disruption of
building safety oversight (see the Company's January 2026 announcement:
https://tinyurl.com/3utctx76 (https://tinyurl.com/3utctx76) ).

 

Disposals and loan facility

Due to uncertainty relating to leasehold and building safety reform, the
Company's strategy has focussed on improving portfolio liquidity and selling
assets where possible. Over the past two financial years to-date, disposals
have totalled £14.8 million, including £5.1 million since the beginning of
this financial year, with a further £1.5 million exchanged.

 

As a result, the Company's loan with Santander UK plc has reduced from £19.5
million to £3.9 million and remains in compliance with all bank covenants.
The Board is considering whether cash reserves (currently £5.6
million) could be utilised for further loan repayments following completion
of the exchanged disposals, subject to working capital requirements of the
Company.

 

Judicial Review of existing legislation

The Company is a party to a Judicial Review challenging the enfranchisement
provisions within the Leasehold and Freehold Reform Act 2024. These provisions
are intended to reduce the premium payable by a leaseholder when extending
their lease or acquiring their freehold (see the Company's audited results for
the year ended 30 September 2025: https://schro.link/grioar25
(https://schro.link/grioar25) ).

 

The claim was dismissed by the High Court in October 2025. The Court of Appeal
has since granted permission to all remaining claimants to appeal on all
requested grounds, with the hearing date yet to be determined. The Company is
considering next steps with other institutional claimants, including a review
of advisers and associated costs.

 

The Bill, as proposed, is expected to further affect the economics of
enfranchisement by capping the amount of ground rent that may be capitalised
when calculating premiums payable to landlords.

 

Reporting timetable

Further detail relating to the independent portfolio valuation and the
resultant impact on the Company's net asset value ('NAV') and strategy will be
included in the unaudited half year results, expected to be published in June
2026.

 

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.

 

Enquiries:

 

Schroder Real Estate Investment Management Limited

Chris Leek

020 7658 6000

 

Singer Capital Markets (Financial Adviser & Broker)

James Maxwell / Sam Butcher (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

 

JTC (UK) Limited (Company Secretary)

Ruth Wright

+44 207 409 0181

 

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