Change of Investment Manager and AIFM
For release 11 April 2019
Ground Rents Income Fund plc - Change of Investment Manager and AIFM
The Directors of Ground Rents Income Fund plc ('GRIO' or 'the Company') are pleased to announce the appointment of Schroder Real Estate Investment Management Limited ('Schroders') as the Alternative Investment Fund Manager ('AIFM'), replacing Brooks Macdonald Funds Limited ('BMFL'). Schroders' appointment is subject to completing the necessary Financial Conduct Authority notification process that is expected to take one month.
Background and rationale
The previous manager, Brooks Macdonald Group, is stepping back from managing GRIO to focus more closely on the Group's core offerings. As part of considering the appointment of Schroders, the Directors of GRIO (the 'Board') considered the following advantages:
· Large and established manager with long experience managing listed real estate investment trusts;
· Long-term track record of outperformance through real estate cycles;
· The ability to retain the existing BMFL management team responsible for the GRIO mandate;
· Strong governance and risk management processes to support the Company dealing with regulatory and legislative change in the sector;
· Active asset management capabilities to deal with complex situations such as the impact of Carillion's liquidation and related litigation at Beetham Tower in Manchester; and
· Simplification of the current investment management fee arrangements so that there is greater alignment of interests between the manager and GRIO shareholders.
The Board believes that Schroders fulfils these requirements, which are expected to deliver the following benefits to investors:
· Stability - Schroders provides a stable platform for the current management team;
· Depth of resource - Combining the current management team with Schroders' extensive resources provides both continuity and greater depth of experience to the GRIO mandate;
· Experience - Schroders Group has managed real estate assets since 1971 and manages eight UK-listed investment trusts. The Real Estate Group manages three listed real estate investment trusts in the UK and Continental Europe;
· Distribution - Schroders has strong relationships with major GRIO shareholders with an extensive distribution capability to support the long-term growth of the Company; and
· Performance and focus - Schroder Real Estate has a long-term track record of outperformance.
James Agar and the existing BFML team responsible for the GRIO mandate will be moving to Schroders. James will continue to lead the provision of Investment Management and AIFM services to the Company and will be supported by the transitioning BMFL team as well as the broader Schroders infrastructure. The Board will undertake a review of the strategy to determine the best course to maximise sustainable shareholder total returns including a review of the dividend policy.
Schroders appointment terms
Schroders has been appointed for an initial period of 3 years to ensure management continuity, following which the termination notice period will be 1 year.
The current investment management fee comprises a base component calculated from GRIO's market capitalisation together with a number of additional payments and commissions from third parties relating to the management of the underlying portfolio.
Since the initial public offering in 2012, market practice has moved towards transparent and simplified fee structures linked to net asset value ('NAV'). As a result, the Board has agreed a simplified, tiered fee for Schroders to provide Investment Management and AIFM services of 1.0% of NAV per annum up to £200 million, payable quarterly in arrears. The fee will be 0.9% of NAV per annum between £200 million and £400 million, and 0.8% of NAV per annum above £400 million. The following provisions also apply:
· For the initial twelve-month period, the fee will be 0.9% of NAV with the potential to earn up to 1.0% of NAV subject to delivering income-enhancing initiatives;
· Upon completing the purchase of a property which has been introduced by Schroders, and for which no third-party introductory fees are payable, Schroders will be entitled to receive an acquisition fee of 1.0% of the acquisition price paid; and
· All additional payments and commissions currently received by BMFL in connection with managing the portfolio and providing services to occupier and long leaseholders will be received by GRIO.
The Board believes the revised fee structure is in line with comparable real estate funds and aligns Schroders' remuneration to long-term shareholder value.
Corporate Governance
The Company also wishes to draw shareholders' attention to Simon Wombwell's, a Brooks Macdonald employee, intention to resign as a Director following the appointment of Schroders. The exact timing will be determined by the appointment of a new independent director for which a search has commenced but will be no later than 30 September 2019.
The Directors will continue to take appropriate measures to ensure that the Company complies with the UK Code on Corporate Governance to the appropriate extent and taking into account the size of the Company and its nature of business.
It is intended that shareholders will be updated in the coming months on Schroders' appointment and the progress being made on reforms to the leasehold sector. It will also allow investors to provide strategic feedback to the manager. In the meantime, the Board has agreed that Schroders will prepare a detailed review of the strategy and the best sustainable investment policy in light of the sector and characteristics of the portfolio.
Malcolm Naish, Chairman of GRIO, commented:
"The Board is delighted to announce its intention to appoint Schroders as the Company's Investment Manager and AIFM. Schroders has a strong track record and over the course of this process demonstrated its commitment to the fund. As a result we believe that Schroders combined with the current management team are well placed to support Ground Rents Income Fund plc during the next stage of its development".
Nick Montgomery, Schroder Real Estate Investment Management Limited, commented:
"Ground Rents Income Fund plc's diversified portfolio of ground rents provides long-term, stable income with high inflation-linkage which is differentiated from other Schroders' real estate products. We recognise the regulatory challenges that face the industry, but believe that we have the platform to support the existing team to continue to be a best-in-class operator in the leasehold sector as evidenced by their commitment to the Public Pledge for Leaseholders.
Furthermore, the residential sector is a growing part of the institutional real estate market and the appointment fits well with Schroders' broader Real Estate strategy to be closer to our assets".
Contacts:
|
Ground Rents Income Fund PLC |
020 7499 6424 |
|
Brooks Macdonald Funds Limited Simon Broomfield |
020 7659 3401 |
|
Schroder Real Estate Investment Management Limited Duncan Owen / Nick Montgomery / Andy Pearce |
020 7658 6000 |
|
N+1 Singer James Maxwell / Ben Farrow |
020 7496 3000 |
|
Tavistock (Media) Jeremy Carey / James Whitmore |
020 7920 3150 |
|
Appleby Securities (Channel Islands) Limited Andrew Weaver / Zim Ceko |
01534 888 777 |
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