Ground Rents Income Fund
plc
Refinance of Loan
Facility
Ground Rents Income Fund plc (the
'Company') announces the refinancing of its existing £25 million
loan facility with Santander UK plc ('Santander'), which was due to
expire in January 2025. The loan was put in place in 2019,
comprising a £12.5 million term loan and a £12.5 million revolving
credit facility, with an aggregate £21 million currently
drawn.
The new loan terms
include:
- A new £19.5 million
facility with an extension in the loan term from January 2025 to 10
July 2026.
- The new loan has a margin of 2.75% per annum, an increase of
90 basis points compared to the previous margin of 1.85% per
annum.
- Existing hedging will
remain in place until expiry in January 2025, consisting of an
interest rate swap on £12.5 million at 0.83% per annum and an
interest rate cap on £5.5 million at 1.00% per annum. This
results in a total current interest rate of 4.0% per annum.
Based on the previous total loan drawn of £21.0 million and
existing hedging, the effective total current interest rate was
3.5% per annum (inclusive of a non-utilisation fee).
- Five assets added to the
security pool for a combined value of £9.5 million, increasing
total charged assets to £53.6 million, resulting in a loan to value
('LTV') ratio of 36.4% compared to a covenant of 50%.
- Refinancing consistent
with the strategic objective to realise assets in a controlled,
orderly, and timely manner, by providing more time to effect
disposals. Santander's agreement to accept new assets also
provides more headroom against loan covenants.
As part of the refinancing, the
Company has used £1.5 million of recent disposal proceeds to reduce
the new loan facility to a total of £19.5 million. Santander
can require all future proceeds from charged asset disposals to be
used to repay the loan facility. The new loan facility also
requires amortisation of £62,500 per quarter from January 2025,
with future disposal proceeds net against the aggregate remaining
amortisation amounts. There are no commitment or early
repayment fees.
The Board and Manager will review
hedging options in advance of the existing hedging expiring in
January 2025, having regard to the outlook for interest rates and
further progress with disposals.
Including the addition of five new
assets, Santander's independent external valuation of the security
pool is £53.6 million, reflecting a LTV
ratio of 36.4%. This compares to a LTV covenant of 50%. At
completion the interest cover ratio ('ICR') is 301%, which compares
to a current ICR covenant ratio of 200%, with the covenant level
reducing to 160% in January 2025. Santander's independent
external valuation includes the industry wide Material Valuation
Uncertainty Clause because of uncertainty relating to both
leasehold and building safety reform.
Based on the Company's latest
unaudited, published, independent portfolio valuation as at 31
March 2023, following the refinancing the group LTV, net of cash,
is 13.8%. The Company's remaining assets are uncharged and
comprise property assets valued at £55.2 million (as at 31 March
2023) and cash of £4.6 million.
For
further information:
Schroder Real Estate Investment
Management Limited
Nick Montgomery / Chris Leek /
Matthew Riley
|
020 7658 6000
|
Singer Capital Markets (Broker)
James Maxwell / Alaina
Wong
|
020 7496 3000
|
Appleby Securities (Channel Islands) Limited
(Sponsor)
Andrew Weaver / Michael
Davies
|
01534 888 777
|
FTI
Consulting
Richard Gotla / Dido Laurimore /
Oliver Parsons
|
020 3727 1000
|
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 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.
See the Company's website for more
information:
www.groundrentsincomefund.com