Ground Rents Income Share Discussion Threads

[badtime] 17/7/2015 10:48

Jonwig...still in?

[jonwig] 21/3/2015 06:49

Yes, I read that last night. With the MCap only about £100m the market would be a bit thin.
The NAV is about 105p, I reckon.

[cyfran101] 21/3/2015 01:14

Prominent tip in IC

[davebowler] 17/2/2015 10:15

n1singer;
Now fully committed
The financial and risk profile and the underlying investments imbue the fund with ultra low risk bond characteristics with little or no link to traditional equities. The underlying strength of the Ground Rent market since listing slowed the pace of investment. The manager chose to initiate and craft the most appropriate structures with developers rather than purely chase investments in the secondary market. This has resulted in a higher proportion of inflation proofed assets with shorter review periods than originally expected. We see the potential for 3.8p of dividends per annum once all options are completed which, after an initial period, should then grow at close to the rate of inflation over the long term.

[jonwig] 28/1/2015 11:09

They have their target £9m with a 107p placing.

[jonwig] 12/1/2015 13:38

They seem to be high-end apartment blocks:



If they aren't sold, it looks as though they can abandon the option, which would be worth the premium cost.

[18bt] 12/1/2015 13:03

Acquisition and placing this morning at a fine discount to share price and premium to NAV. Good use of recent strenght in share price

[jonwig] 04/12/2014 08:20

FY Results.

Transactions for large, institutional-type portfolios are occurring at yields which have not been seen before and are more closely aligned to index-linked gilt rates.

"The Company has seen the benefit of this in terms of capital value appreciation, but the corollary is that it has become increasingly difficult to find new investments for prices at which GRIF could achieve its target dividend yield.

Of course, they could return capital to shareholders rather than chase yields lower.
Anyway, showing asset value growth.

[jonwig] 26/10/2014 07:41

bisiboy - yes, that's been said (post #25).

But rental income returns should be steady or rising, whereas capital values can fall, especially if bid up far enough.

When I bought some of these, I hoped they would be a substitute (to some extent) for an index-linked gilt, with a better yield but less indexing. I'm not so sure now, with the yield compression. Anyway, I haven't sold but haven't added.

[bisiboy] 25/10/2014 18:11

yes but surely lower yields equal rising prices and therefore an increase
in their NAV.

[jonwig] 01/10/2014 14:19

Mozy - it's in the 'Outlook' section of their H1 report. I tried to copy/paste from my pdf but they've snarled up the facility.

You might get it here:



Also their recent monthly reports have stressed the same point, that GRs are having to be purchased on lower yields.

[mozy123] 01/10/2014 12:35

Jon - why would the base level of dividends fall?

[analyst] 22/7/2014 10:24

Falling away as predicted above.

[jonwig] 27/5/2014 09:53

Loldemort - sorry, I missed your last post.

Valid points, I think, but we could all argue over what is *real* inflation: and the rates used by property companies needn't be either RPI or CPI.

What is more concerning, perhaps, is this from the March factsheet:

In the coming quarter we expect that there will be continued institutional investor competition for large portfolios, which will, consequently, put further downward pressure on yields, and that the rest of the market will remain stable but very competitive. The company will maintain dialogue with shareholders to manage expectations of the company's performance...

which has a pretty clear meaning!

[loldemort] 07/5/2014 09:07

I note that in the FY '13 report their mention of mixed-use commercial-residential properties all seemed to have 5-year reviews on the commercial side and 25-year 'fixed uplifts' on the residential side. If those residential uplifts are in any way comparable to the 50-year fixed doubling of ground rent also mentioned for another property, then this investment isn't in any way going to provide an inflation hedge, at least not on the residential GRs.

If we take a figure of 4% for *real* annual inflation (i.e. not massaged figures) then 1.04 to the power 25 is 267% and 1.04 to the power 50 is 711%. And of course, over 25 or 50 years I guess the risk is to the upside.

Also, while capital values could be expected to keep pace with real inflation roughly speaking, the commercial leases seemed to have reviews linked to RPI, which usually underestimates.

[18bt] 30/1/2014 07:25

Seems a sensible yield to aim at

[jonwig] 30/1/2014 07:16

FY results and full annual report:



For the first time, they have put a figure on the dividend policy (page 17):

The Directors set an annualised target dividend yield
of 4.4 per cent. per annum, in May 2013, calculated on
the issue price of the ordinary and convertible preference
shares and on the assumption that all of the net
proceeds from the share issues have been invested
in accordance with the Company's investment strategy and
that the convertible preference shares issued in
May 2013 have been converted into ordinary shares.

I also have a sense that they admit it will be hard to meet this, since prices of prime GRs are being bid higher than they are happy with. That, of course, means more of the share price return will be capital.

[jonwig] 09/11/2013 08:01

Ground rents have gained in popularity in recent years as investors continue to search for assets that provide strong and secure income streams.

More:

[jonwig] 08/9/2013 08:17

Thanks for the information, Dave, but ...

"The Company is shortly to pay its final first year dividend, which is in excess of the target return outlined at the time of the IPO and, therefore, positive news for shareholders."

As I've mentioned earlier, the IPO Prospectus contained no information on dividend policy or target returns, except for an explanation of the REIT rules.
I suppose some institutions might have been briefed about it.

As for new-build residential apartments in central Leeds, there was a huge overhang of these dating from 2008. I'm surprised this seems to have been cleared - if it has been!

I'd like to know where Investec gets a running yield of 5.4% from: annualising PIDs of 1.15p gives 4.60p, so a running yield of 4.4% at the share's offer price.

[davebowler] 06/9/2013 10:57

Investec;


6 September 2013




Property

Ground Rents Income (GRIO) - Trading Statement 1 April to 31 August 2013.

¢ A further £7.5m was invested in six transactions totalling more than 1,000 units, with the IPO proceeds fully invested.

¢ Dividends paid for the period from GRIF's IPO on 13 August 2012 to 30 September 2013 of 2.8p/share, ahead of the target return set at the time of IPO.

¢ Convertible Preference Share Dividend declared of 0.7p/share for the period from 25 May 2013 to 30 September 2013.

¢ A strong pipeline of future investment opportunities will enable the Company to achieve its 12 month investment timetable set at the time of the May 2013 Convertible Preference Share issue.

¢ There are significant opportunities to deliver enhanced yields outside the traditional residential market, whilst continuing to provide predictable returns with assets linked to inflation that also have 'gilt-like' security characteristics. This opportunity for increased yield has been evidenced by the recent completion of a number of deals in both the hotel and student accommodation sectors. These assets have been added to the portfolio to drive gross dividend yield, whilst continuing to maintain the core investment characteristics.

¢ The Company is shortly to pay its final first year dividend, which is in excess of the target return outlined at the time of the IPO and, therefore, positive news for shareholders.

Investec Insight:

¢ With a running yield of 5.4% the fund is delivering an attractive yield, which is ahead of target and they are on track for the full 12 month investment.

¢ The enhanced yield is also interesting given the diversification into commercial as well as residential.

[18bt] 06/9/2013 07:10

Nice update this am. Good inflation hedge and appears well run. Recent pick up in the housing market and new building will help investability.

[jonwig] 28/8/2013 11:36

Webby, RNS at 08:00;



Yes, there was a warning in an earlier post about the possibly low yield. Of course, they'll have management charges which you won't apply to your own efforts.
The partial indexing is useful with, I think, pretty low risk.

[webby] 28/8/2013 10:56

Jonwig
Where did you last divi info come from?
I can find nothing on their site regarding it.
I have long been interested in ground rents and own some myself.
However income from this fund seems low compared to my own interests.
An increase in payout to say 4.5% is much more interesting.