Ground Rents Income Fund plc - GRIO
Ground Rents Income Fund Limited ('the Company') is a closed-ended real estate investment trust incorporated in England on 23 April 2012. The Company has been listed on The International Stock Exchange (‘TISE’) and has traded on the SETSqx platform of the London Stock Exchange since 13 August 2012. Schroders Capital was appointed as the Company’s Alternative Investment Fund Manager (‘AIFM’) in May 2019 to support the 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 the following amended Investment Policy:
- The assets of the Company will be realised in a controlled, orderly and timely manner, with the objective of achieving a balance between (i) periodically returning cash to shareholders at such times and from time to time and in such manner as the Board (in its absolute discretion) may determine; and (ii) optimising the net realisation value of the Company’s investments.
- The strategy for realising individual investments will be flexible and may need to be altered to reflect changes in circumstances of a particular investment or in the prevailing market conditions. All material disposals of assets to be made by the Company will be approved by the Board.
- Whilst implementing this realisation strategy, the Company will aim to deliver best-in-class residential asset management including fairness, transparency, and affordability for leaseholders. The net proceeds of portfolio realisations will be returned to shareholders at such times and from time to time and in such manner as the Board (in its absolute discretion) may determine. The Board will take into consideration the Company’s working capital requirements (including, but not limited to, debt servicing and repayments), the cost and tax efficiency of returns of capital and the requirements of applicable law.
- The Company may not make new investments, except where required to preserve and/or enhance the disposal value of its existing assets.
- To the extent that the Company has not disposed of all of its assets by the time of the next shareholder vote to consider the Company’s future to be held on or before 31 December 2024, in accordance with the revised articles of association of the Company, shareholders will be provided with an opportunity to review the future of the Company. To that end, an ordinary resolution will be proposed on or before 31 December 2024 that the Company will continue as then presently constituted.Any cash received by the Company as part of the realisation process but prior to its distribution to shareholders will be held by the Company as cash on deposit and/or as cash equivalents.
The Company’s portfolio benefits from the following characteristics:
- Highly-diversified, long-term portfolio of approximately 19,000 units across 392 assets with a low default risk.
- Predictable revenue with upward-only rental increases, of which 71% of the ground rent income is indexed-linked, predominantly to the Retail Price Index (“RPI”).
- Long-term income with weighted average lease duration of 375 years.
- 46% of the portfolio ground rent income is due to be reviewed over the next five years.
(Information as at July 2023)
Meet the manager
“We aim to optimise value for our shareholders via a controlled, orderly, and timely realisation of assets and deliver best-in-class residential asset management for our leaseholders.”
Independent Board of Directors
Discrete yearly performance (%)
Discrete Yearly Performance (%)
Q1 2022 Q1 2023
Q1 2021 Q1 2022
Q1 2020 Q1 2021
Q1 2019 Q1 2020
Q1 2018 Q1 2019
Share Price (1)
Shareholder Total Return (2)
NAV Total Return(3)
Issued in June 2023.
Past performance is not a guide to future performance and may not be repeated. The value of investments and the
income from them can go down as well as up and you may not get back the amount originally invested.
1 Source: Schroders Capital, Datastream, bid to bid price with net income reinvested in GBP.
2 Source: Schroders Capital, Datastream, bid to bid price
3 Source: Schroders Capital, NAV to NAV (per share) plus dividends paid
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Investing in Ground Rents Income Fund plc
What are the risks?
Following a change to the Investment Policy in April 2023, the assets of the Company will be realised in a controlled, orderly and timely manner, with the objective of achieving a balance between (i) periodically returning cash to shareholders at such times and from time to time and in such manner as the Board (in its absolute discretion) may determine; and (ii) optimising the net realisation value of the Company’s investments. The strategy for realising individual investments will be flexible and may need to be altered to reflect changes in circumstances of a particular investment or in the prevailing market conditions. All material disposals of assets to be made by the Company will be approved by the Board. The Company may not make new investments, except where required to preserve and/or enhance the disposal value of its existing assets. (Please see above for the Company’s Investment Policy in full.)
The Company may be concentrated in a limited number of geographical regions, industry sectors, markets and/or individual positions. This may result in large changes in the value of the fund, both up and down, which may adversely impact the performance of the fund.
The Company may borrow money, which is known as gearing. Gearing will increase returns if the value of the assets purchased increases in value by more than the cost of borrowing, or reduces the returns if they fail to do so.
As a result of fees being charged to capital, the distributable income of the fund may be higher but there is the potential that performance or capital value may be eroded.
The Government has been considering reforms to the residential leasehold system and building safety regime since 2017. This has created uncertainty and impacted the Company. More specifically, the uncertainty relating to the practical and financial impact of building safety legislation on the Company’s portfolio has resulted in a disclaimer of opinion within the Auditor’s report (the ‘Modified Auditor’s Report’) in the 2022 Annual Report. This modification was caused by the Company’s Auditor being unable to adequately verify the various assumptions made by the Company’s independent valuer. Whilst the Modified Auditor’s Report remains in place, all future dividend payments will be withheld, despite the Company having significant distributable reserves and good visibility of earnings. The final outcome of future building safety and residential leasehold legislation remains unclear and could negatively impact the Company’s portfolio further. The Board of the Company and Schroders Capital as Investment Manager are focussed on a clear strategy to address the headwinds to do with building safety and leasehold reform and thereby to optimise value for shareholders via a controlled, orderly, and timely realisation of assets, whilst aiming to deliver best-in-class residential asset management for leaseholders. Further details are contained in the recent report and accounts.
Non-Mainstream Pooled Investments (NMPI) Status
The Company currently conducts its affairs so that its shares can be recommended by IFAs to ordinary retail investors in accordance with the FCA's rules in relation to non-mainstream investment products and intends to continue to do so for the foreseeable future. The Company's shares are excluded from the FCA's restrictions which apply to non-mainstream investment products because they are shares in an investment trust.