Ground Rents Income Share Discussion Threads

[cwa1] 09/5/2019 20:54

A reasonably content non-holder here!

[spectoacc] 09/5/2019 20:53

Struggle to see how this won't just wither away - are they still paying the divi partially out of capital? Does the NAV reflect the court judgement against them? Where are we with legislation?

Costs need to be cut too - chances of them growing into the cost base now seem remote.

[spectoacc] 31/3/2019 08:35

Investor Report a fortnight ago made for pretty grim reading too - with not much more detail on the legal case:

[sikhthetech] 30/3/2019 22:43

Brokenshire announces industry pledge to crack down on toxic leasehold deals

[slicethepie] 12/2/2019 08:36

My error ....doh

[spectoacc] 12/2/2019 08:23

@slice - that's Brum, this is Beetham Tower Manchester - any idea what they paid for it?

[Edit - this one it seems, so pre-IPO: hxxp://www.groundrentsincomefund.com/portfolio/beetham-tower-manchester/

[Edit 2 - seems they paid £9.6m for "an established portfolio" consisting of Beetham, Gatehouse, & Masshouse, which doesn't tie in with the link above. What I'd like to know is - are any others in their portfolio at risk of multi millions of costs, whether ultimately recoverable or not? And what does this mean for the uncovered dividend?]

Also realised there's no mention in today's RNS of:

"In a second issue considered by the court, BML is also entitled to damages in respect of the release of dirty water into the water supply of the building due to lack of maintenance. BML is entitled to two-thirds of its costs in respect of an interim injunction it sought in connection with the water supply issue, such costs will be determined at a future date. "

[slicethepie] 12/2/2019 08:10

From the 27 June 2018 :interims for mar 2018 interimsSome heads should role !Beetham Tower BirminghamIn November, the residential head-lease interest of Beetham Tower Birmingham was completed. The 39-floor mixed-use building, designed by SimpsonHaugh, was built in 2006. The 152 apartments generate £25,950 of total ground rent linked to 21-year RPI, although a non-peppercorn rent linked to five-year RPI is payable to the freeholder, which brings net ground rent to £13,288.The Group paid £152,000 for the asset, giving a gross initial ground rent yield of 8.74%, which should provide an excellent income return on capital deployed, partly due to the unique ground rent review pattern secured against one of Birmingham's most recognisable buildings.

[spectoacc] 12/2/2019 07:31

An AGM statement that is actually an RNS about the court case they lost. On the plus side, they seem confident they can recover the £4m remedial costs and maybe the legals too. On the negative side, they've got to spend the £4m, spend the legal fees, then hope to recoup it:

"However, in order to comply with the judgment NWGR will be required to finance the remedial work and any litigation costs while seeking recovery from Carillion's Insurers and BUG. There can be no guarantee that NWGR will be successful in that recovery, but it has received legal and expert advice which suggests that its case is strong. "

[sikhthetech] 07/2/2019 17:50

The Great Leasehold Betrayal: Minister REFUSES to crack down on toxic contracts and blames buyers for being too 'excited' to read small print properly - as families reveal they are trapped in 'nightmare' houses that are unsellable

[spectoacc] 01/2/2019 16:27

DJN headline points out GRIO have been ordered to pay £250k, but there's a lot more here - legal costs, probably for both sides, cost of remedial work (within 18 months), damages for dirty water, whether Carillion's insurers will meet any of the costs, whether this sets a precedent for other buildings that GRIO own the freehold of.

Would be interested to see any analyst comments, if anyone comes across any.

[spectoacc] 01/2/2019 08:13

Hadn't spotted that. To be fair, maybe they'll recover some of it from Carillion's insurer. Have to wonder if this is the only one tho, & perhaps why they litigated it (easy to say with hindsight but seems a fairly damning judgement).

[slicethepie] 01/2/2019 07:59

They only bought this building in Nov 2017! Sold a pup

[spectoacc] 01/2/2019 07:34

You don't get this with a Linker:

"01 February 2019

Ground Rents Income Fund plc

("GRIO" or the "Company")

Notification of Judgment

Ground Rents Income Fund plc (LSE: GRIO), a listed real estate investment trust ('REIT') investing in UK ground rents, wishes to announce that a High Court judgment has been handed down in connection with the recent hearing of the case between its wholly owned subsidiary North West Ground Rents Limited ('NWGR') and Blue Manchester Limited ('BML'), a leaseholder within Beetham Tower, Deansgate, Manchester, (the 'Building') the principal freehold property asset owned by NWGR.

In the Company's 2018 Annual Report and Financial Statements details were disclosed regarding NWGR's intention to defend legal action brought by a leaseholder (as set out within the Notes to the Consolidated Financial Statements: Note 22 Other financial commitments and contingencies). Legal advice obtained at the time of approval and publication of the 2018 Annual Report indicated that no significant liability or no material irrecoverable losses were likely to arise in respect of the claim. Furthermore, the published Net Asset Value ('NAV') of GRIO as at 30 September 2018 included a write down of the Building's value to reflect the influence of the legal action and the uncertainty of its outcome.

The principal basis of the claim relates to the failure of the structural sealant on a number of shadow box units, which form part of the façade of the Building, and the question of whether or not the remedial work done to date has kept the building in good and substantial repair.

A summary of the judgment is as follows:

The court has found for BML. The Building is in disrepair and BML is entitled to an order for specific performance that permanent remedial works be designed and implemented within a period to be agreed or the subject or further order although the provisional view of the court is that this should be within 18 months from the judgment date. Hoardings, which were erected by the contractor while the initial remedial works were carried out, must be removed within a period to be agreed or the subject or further order although the provisional view of the court is that this should be within one month and BML is entitled to damages in respect of a period of 31 months when the hoardings have been in place.

NWGR was ordered to pay GBP250,000 on account towards BML's costs within 28 days. The final amount of costs will be determined at a future date.

In a second issue considered by the court, BML is also entitled to damages in respect of the release of dirty water into the water supply of the building due to lack of maintenance. BML is entitled to two-thirds of its costs in respect of an interim injunction it sought in connection with the water supply issue, such costs will be determined at a future date.

The damages associated with this judgment have yet to be determined in a separate hearing, for which a date has not been set.

There are a range of potential next steps which NWGR could take, which include pursuing the proceedings which it has already issued against the original contractor's insurers and the sub-contractor through existing warranties and indemnities, which, if successful, would limit any potential liabilities or irrecoverable losses for NWGR. The proceedings have been issued against the contractor's insurers because the contractor was Carillion Construction Limited, now in liquidation.

BML has also commenced action against the contractor's insurers and sub-contractor through their existing warranties.

As regards the remedial works, the scope of the trial was limited to the issue of liability for the remedial works to be completed, but not the issue of the quantification of the cost of such works. NWGR continues to seek advice on the nature of the remedial works required to comply with the judgment and their associated cost.

NWGR will evaluate what the next actions and consequences of the judgment may be. NWGR is reliant on the financial support of GRIO to finance further legal action and to comply with the judgment. The Company continues to review its own obligations in regard to NWGR and NWGR's obligations under the judgment.

The GRIO board will keep shareholders informed of progress and provide a further update as and when appropriate.

[cwa1] 07/1/2019 12:44

RIO?! Not much relevance here.

[porsche911sse] 07/1/2019 11:13

SP Angel cover Rio this morning

[sikhthetech] 05/1/2019 20:18

Still no further with stopping the sale of new build houses as leasehold...
Government's Help to Buy still a major issue..


Thousands of homebuyers in 'leasehold limbo'

"The firm's analysis of Land Registry figures showed 26,024 new-build properties have been sold with leaseholds since the government’s pledge last December, 2,644 of which were houses.

Data from the Ministry of Housing, Communities and Local Government showed 5,949 leasehold homes were bought with assistance from the Help to Buy scheme in the first six months of this year- 1,340 were houses."

[spectoacc] 21/12/2018 09:06

@Jombaston - yes, GRIO has offered the RPI switch. Unfortunately for them, that isn't what the legislation may come up with. Interesting to see how few leaseholders have taken it up.

Fair point about retrospective changes - unfortunately, Parliament can do whatever it wants, and altering contracts is exactly what they're planning. Banning the future sale of houses on leasehold has no effect on GRIO either way.

Being sub-scale is bad enough (disproportionate charges etc), but the continuing near-death of the traded market can't be helping - and if they do get to pick anything up on the cheap, it has a knock-on effect on the valuations of what they already hold.

Everything has its price - but I suspect GRIO's is currently too high at c.£1.09, particularly when you can buy long-lease prop co's on eg 10% discounts and 8% yields. GRIO may be much more recession-proof, but it's not legislation-proof.

[jombaston] 21/12/2018 08:36

Its important to understand that it is the impact of reforms on pre-existing ground rents/leases that is key here. It is much more difficult to change existing contracts than lay down the law on new leases.

As has been previously pointed out, it is the doubling ones that are most likely to be changed retrospectively. Here GRIO is already offering to switch to RPI.

The div is not far from being covered from current cash flow - the main problem here is that the fund is sub-scale and not likely to grow in the near future. They have good assets which are becoming more difficlt to source over time. It would make more sense sitting in a pension fund somewhere rather than a publicly traded fund.

[muffster] 21/12/2018 07:22

The property yields here are low 3%.Seems to be saying the property values are too high. For a five Yr cash account you can get 2.35%The warrants do sound interesting but then you could in this economic cycle be gearing an overvalued portfolio

[spectoacc] 21/12/2018 07:02

@apollo - it's not them, they don't do their own valuation: it's Savills. They talk about revisions to NAV once more transactions have occurred, or the reforms decided upon. But if the reforms are as now mooted, NAV is dropping a lot further IMO.

As I pointed out on this thread above [Edit: post 147, see page 2 of the following, re the "cost/value" figures: much of what they hold has enjoyed massive valuation uplifts in the past few years. That in reverse would be nasty.

On the plus side - they're in few of the "worst" ground rents, the doubling ones.

[apollocreed1] 20/12/2018 20:07

I feel this fund is being overly conservative with their NAV mark-downs. The last report of the Freehold Income Authorised fund which similarly invests in Ground Rents, states that their surveyor advised them not to mark down the portfolio until the government publishes its final review.
I'm actually quite impressed that GRIO has held most of its value in this falling stock market.

[spectoacc] 20/12/2018 15:17

Results out, not pretty I fear.

Edit - only skimmed it, but the loss, drop in NAV, £10 mooted ground rent limit, costs, and extraordinary length of something released on a pre-Christmas afternoon, don't inspire confidence.

Sounds like NAV may be falling again next time too, though a lot will depend on the "2020/21" mooted reforms.

[kenmitch] 19/9/2018 20:47

I bought GRIW (Ground Rents Income Warrants) back today at 9p. Had sold earlier this year at 19p as share price fell on Government ground rent negatives. Share is inching up again from 100p low, and now 107.5p to sell.

See previous posts for warrant plus case. Simple. If at any time between now and warrant expiry date in August 2022 the share can go up 10% to around 120p then GRIW will double and if share price gets back to 130p, just over 20% higher than today, GRIW will triple.. Could well prove to be an excellent, very rewarding long term lockaway.