Ground Rents Income Fund plc

Unaudited Portfolio Valuation as at 31 March 2024

Ground Rents Income Fund plc (the 'Company') announces the unaudited independent valuation of the underlying portfolio as at 31 March 2024 of £81.5 million, prepared by Savills Advisory Services Limited ('Savills').   This reflects a like-for-like reduction (net of disposals) of £26.5 million or -24.6% compared with the last reported independent valuation as at 31 March 2023 of £110.9 million, and a like-for-like reduction (net of disposals) of £21.3 million or -20.7% compared with the previously unannounced independent valuation as at 30 September 2023 of £106.1 million. 97% of the portfolio valuation is subject to the industry-wide Material Valuation Uncertainty Clause because of uncertainty relating to both leasehold reform and building safety reform.

The valuation reduction follows the November 2023 UK Government consultation regarding restricting the level of ground rent which leaseholders in England and Wales pay for existing residential leases, including the Government's stated intention not to pay compensation to freeholders.  This consultation represented a significant shift in the Government's approach to leasehold reform and has led to a pause in market activity and negatively impacted values. Since the Government consultation was announced in November 2023, and as previously announced to shareholders, the Company has worked with industry peers and advisors to prepare a comprehensive response, which was submitted in line with the consultation timetable on 17 January 2024. The potential outcome of legislative change following the Government consultation remains uncertain, and the Company will continue to keep shareholders advised of material developments.

The Savills valuation as at 31 March 2024 of assets charged to the Company's lender, Santander, is £42.5 million, which compares with the independent bank valuation used for the recently completed loan refinancing of £53.6 million, a difference of -£11.1 million or -20.7%.  The bank valuation was also subject to the Material Valuation Uncertainty Clause, with the difference reflecting the challenge of valuing in a market impacted by negative sentiment relating to proposed leasehold reform, and the resultant lack of comparable evidence.  The loan to value of the Santander facility, adopting the Savills valuation, is 45.8% (36.4% based on the bank's independent valuation when the refinancing was completed in March 2024), which compares with a loan to value covenant ratio of 50%.  The group loan to value, net of cash, based on the Savills valuation of the whole portfolio is 17.9%.

The recent refinancing with Santander included adding new assets to the security pool and all proceeds from any future sales will be used to repay the loan facility.  The new loan facility also requires amortisation of £62,500 per quarter from January 2025.  The Company aims to progress further disposals, however there can be no guarantee that disposals will take place, given the market uncertainty relating to leasehold reform.

Further detail on the unaudited independent valuation as at 31 March 2024 will be included within the forthcoming audited year end results to 30 September 2023, due to be released before the end of June.

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.

For further information:  

Notes to editors: 

Ground Rents Income Fund plc is a closed-ended real estate investment trust, listed on The International Stock Exchange ('TISE') and traded on the SETSqx platform of the London Stock Exchange. 

Schroder Real Estate Investment Management Limited (the 'Manager') was appointed as the Company's Alternative Investment Fund Manager in May 2019 to support the Company's Board with the headwinds related to building safety reform and leasehold reform. 

During the first half of 2023 the Board and Manager carried out an extensive shareholder consultation on proposals to change the Continuation Vote mechanism included in the Articles dating from 2012, as well as proposed changes to the Investment Policy.  These proposals received strong support from shareholders and resulted in a new Continuation Resolution and Investment Policy.  The new Investment Policy adopts a strategy of realising the Company's assets in a controlled, orderly and timely manner for shareholders, whilst continuing to deliver best-in-class residential asset management including fairness, transparency, and affordability for leaseholders. 

On 9 November 2023, the Government published a consultation on restricting the level of ground rent which leaseholders in England and Wales pay for existing leases.  The consultation represents a significant shift in the Government's approach to leasehold reform and could have a materially adverse impact on the value of the Company's underlying portfolio.  The Company submitted a comprehensive response to the consultation on 17 January 2024 and has kept shareholders informed of this consultation, including through regulatory announcements made on 20 November 2023 and 16 February 2024, which can be found at: www.groundrentsincomefund.com 

The potential outcome and timing of further legislative change following the Government consultation remains highly uncertain, and the Company will notify shareholders when there is further clarity.   

Due to ongoing work relating to leasehold and building safety reform, the Company has delayed the release of its year-end audited accounts from early 2024 to during the quarter ending 30 June 2024.  This extension has been approved by Companies House and TISE.  The Company expects to hold a separate Extraordinary General Meeting in advance of 30 June 2024, at which the Accounts will be presented to shareholders and shareholder resolutions relating to the Accounts will be proposed. 

Please see the Company's website for more information: 

www.groundrentsincomefund.com