4
July 2024
Ground
Rents Income Fund plc
FULL YEAR
RESULTS FOR THE YEAR ENDED 30 SEPTEMBER 2023
Ground Rents Income Fund plc (the
'Company') announces its audited full year results for the year
ended 30 September 2023, alongside an
update on progress for the period from 1 October 2023 and the
unaudited portfolio valuation as at 31 March 2024.
The Company's Annual Report and Accounts for the
year ended 30 September 2023, containing a notice of extraordinary
general meeting to be held on 5 August 2024 at 12.00 pm at 1 London
Wall Place, London, EC2Y 5AU, are being published in hard copy
format and are also available at the following link: https://schro.link/grio24,
or on the Company's website www.groundrentsincomefund.com.
Barry Gilbertson, the Company's
Chair, commented:
"The Company continues to
face significant challenges that are largely
outside of its control, with the ongoing
management of complex building safety projects relating to assets
developed by third parties, and uncertainty relating to leasehold
reform. Despite these headwinds, we continue to make progress in
important areas, including loan refinancing, disposals, and
securing very strong shareholder support for our new investment
policy."
Key
highlights for the year to 30 September 2023:
· Independent portfolio valuation as at 30 September 2023 of
£106.1 million, a decline of £2.9 million, or 2.7%, over the year
(30 September 2022: £109.0 million). Together with the impact
of weaker sentiment and a lack of transactional evidence, the
valuation included a negative valuation adjustment of £9.1 million
relating to assets subject to the Material Valuation Uncertainty
Clause ('MUC') (30 September 2022: £11.4 million) and a negative
valuation adjustment for residential leasehold reform risk of £4.2
million (30 September 2022: £3.8 million). At the year-end, the MUC
related to 24 of the Company's 392 assets totalling approximately
18% by value.
·
NAV of £86.2 million, or 90.1 pence
per share ('pps') (30 September 2022: £88.5 million or 92.5
pps). Dividends paid totalling £1.2 million
or 1.25 pps (30 September 2022: £2.9 million or 3.0
pps), leading
to a negative NAV total return of 1.3% (30 September 2022:
-7.4%).
· Since June 2023 the Company has been unable to pay further
dividends due to a Modified Auditors Report relating to uncertainty
regarding determining building remediation costs and a lack of
market transactional evidence.
· Group Loan to Value ('LTV'), net of cash, of 18.3% based on
the independent portfolio valuation as at 30 September 2023, with
£21.0 million of drawn debt and an effective interest rate of
3.5%.
·
Extraordinary General Meeting
in April 2023 with very strong support for a new investment policy
focussed on optimising value through a controlled and orderly asset
realisation, and a new Continuation Vote mechanism commencing in
December 2024.
· Continued focus on delivering best-in-class residential asset
management including proactive implementation of building safety
projects, a high standard of governance, and transparency in
dealings with our leaseholders.
The
Company also provides an update on progress and activity since the
financial year end, including the interim period end portfolio
valuation as at 31 March 2024:
· Increased uncertainty relating to leasehold reform, notably
the November 2023 Government Consultation regarding restricting
existing ground rent, without compensation to freeholders.
This potential outcome represented a significant shift in the
Government's approach to leasehold reform and led Savills, in
conjunction with other valuers and the RICS, to adopt the MUC
across the entire residential ground rent market.
· Since November 2023 the Company worked extensively with
industry peers and advisors to prepare a comprehensive response to
the Consultation, submitted in January 2024. Recent political
upheaval resulted in an accelerated Leasehold and Freehold Reform
Act 2024, enacted in May, which currently represents a better
outcome than the worst-case scenarios contemplated in the
Consultation.
· Independent portfolio valuation as at 31 March 2024 of £81.5
million, reflecting a like-for-like reduction (net of disposals) of
£21.3 million or -20.7% over the period (30 September 2023 of
£106.1 million). Together with the impact of weaker sentiment
and a lack of transactional evidence, this included a negative
valuation adjustment of £7.2 million (30 September 2023: £9.1
million) for building safety and £4.9 million for leasehold reform
risk (30 September 2023: £9.1 million), with 97% of the portfolio
valuation subject to the industry-wide MUC at the half year
end.
·
Completed the disposal of
freehold ground rent interests in Bristol and Exeter, for a
combined price of £3.45 million, achieving a 4% premium to the 30
September 2023 independent valuation of £3.3 million and reflecting
a net initial yield of 3.1%. Further disposals are planned
and in progress.
· Refinanced the existing £25 million loan facility with
Santander UK plc in March 2024, which was due to expire in January
2025. The new £19.5 million facility extends the loan term from
January 2025 to 10 July 2026, and has a margin of 2.75% per
annum. Group LTV at the point of
refinancing, net of cash, of 17.9% based on the independent
portfolio valuation as at 31 March 2024, with an effective interest
rate of 3.5%.
Enquiries:
Schroder Real Estate Investment
Management Limited
Nick Montgomery / Chris Leek /
Matthew Riley
020 7658 6000
FTI Consulting
Richard Gotla / Dido
Laurimore
0203 727 1000 / Schroderrealestate@fticonsulting.com
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