Full year results for the year ended 30 Sept 2023
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
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