Ground Rents Income Fund PLC Corporate Update (8165M)
August 02 2017 - 4:00AM
UK Regulatory
TIDMGRIO
RNS Number : 8165M
Ground Rents Income Fund PLC
02 August 2017
2 August 2017
Ground Rents Income Fund plc
("GRIF" or the "Company")
Corporate update
Ground Rents Income Fund plc, a listed real estate investment
trust (REIT) investing in UK ground rents, notes the recent
attention in the media regarding ground rents and the launch by the
Communities Secretary, Sajid Javid, of a consultation on proposals
to amend leasehold legislation.
The attention has been focused on leasehold houses, which
account for 11% by income of the Company's portfolio, and, in
particular, leaseholds with ground rents that double perpetually
every 10 years, of which the Company has none.
GRIF was launched in 2012 and has acquired a diversified
portfolio of ground rents, valued at GBP143 million at 31 March
2017, which provide a secure and consistent stream of income to
investors.
Doubling ground rents
Most of the Company's portfolio (69.8% by income) is invested in
ground rents which increase annually in line with indices,
particularly the Retail Prices Index (RPI). Of the remainder, 18%
by value and 17% by ground rent income is attributed to doubling
ground rents, of which 4% of the ground rent income is derived from
three 10-year doubling assets. None of these three assets with
10-year doubling ground rents do so in perpetuity - they double a
maximum of three times before reverting to having either no further
review or an index-linked review cycle.
The rest of the doubling assets in the portfolio are 25, 33, 35
and 50-year doubling assets, which equate to compound increases in
rent of 2.8%, 2.1%, 2.0% and 1.4% per annum respectively.
GRIF's total portfolio - breakdown of ground rent review
pattern
Type of rent review % of income
--------------------- ------------
Index-linked 69.8
--------------------- ------------
Fixed uplift 7.3
--------------------- ------------
Flat (no review) 6.5
--------------------- ------------
Doubling, 25 years 10.0
--------------------- ------------
Doubling, 10 years 4.0
--------------------- ------------
Doubling, 50 years 1.8
--------------------- ------------
Doubling, 33 years 0.4
--------------------- ------------
Doubling, 35 years 0.2
--------------------- ------------
Leasehold houses
Of the total number of units in the portfolio, 15% are houses,
which generate 11% of total ground rent income. The average ground
rent on the leasehold houses is approximately GBP110 per annum and
none are subject to 10-year doubling review patterns.
The ground rents on 66.7% by income of the leasehold houses
adjust in line with indices, with only 2.7% containing doubling
reviews on a 25-year review pattern. The balance of 30.6% is split
between leaseholds with fixed adjustments (3.6%) and those which do
not increase (27.0%).
GRIF's portfolio of houses - breakdown of ground rent review
pattern
Type of rent review % of income
--------------------- ------------
Index-linked 66.7
--------------------- ------------
Flat (no review) 27.0
--------------------- ------------
Fixed uplift 3.6
--------------------- ------------
Doubling (25 years) 2.7
--------------------- ------------
The Board, in conjunction with the Investment Manager, is
considering asset management options for certain ground rents
within the portfolio, reflecting concerns raised by the
Government.
The Board reiterates its belief, previously stated in the
Company's 31 March 2017 unaudited NAV announcement on 12 June 2017,
that as a result of recent market sentiment the value of the
doubling assets within the portfolio may now be worth approximately
GBP5.5 to GBP6.0 million less than as at 31 March 2017. This would
lead to an NAV per share of approximately 132 pence.
The Company will provide a further update once it has received
the next scheduled valuation of the portfolio by Savills, its
external valuer, as at 30 September 2017.
James Agar, Investment Director of Brooks Macdonald Funds,
Alternative Investment Fund Manager to GRIF, said: "We welcome the
Government's consultation, which will lead to clarity on leasehold
and ground rent structures. We will in due course submit our own
response to the consultation, which will be available to view on
our website.
"We are committed to being a socially-responsible landlord,
working hard to treat all leaseholders in a simple, honest and
transparent manner".
Contacts:
Ground Rents Income Fund
plc
020 7499
Simon Wombwell (Director) 6424
Brooks Macdonald Funds Limited
020 7659
James Agar (Director) 3454
N+1 Singer (Broker)
020 7496
James Maxwell / Liz Yong 3000
Tavistock (Media)
020 7920
Jeremy Carey / James Whitmore 3150
Appleby Securities (Channel
Islands) Limited
Kate Storey / Danielle Machon 01481 755600
This information is provided by RNS
The company news service from the London Stock Exchange
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