Ground Rents Income Share Discussion Threads

[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.

[jonwig] 28/8/2013 08:30

Quarterly dividend of 1.15p (against 0.7p last time), so that's annualised to 4.6p which gives a pretty respectable return, partially indexed.

Presumably the earlier 0.7p was due to funds incompletely invested.

[davebowler] 22/5/2013 10:36

c.60% of ground rents they own have a link to RPI

[jonwig] 12/5/2013 14:54

Analyst - thanks for that.

GRIO seems to be paying an annualised 2.8p (say 2.5% on offer price) which is largely index-linked to ... something! (As mentioned before, there's no forecast in the prospectus or since.)

I suspect this might be a good rate in that it's lots better than index-linked gilts and (I think) just about as safe, in that the freeholder (GRIO) will have legal power over any owner who defaults on a pretty minor amount.

It will be interesting to see how the take-up of the new shares goes.

[analyst] 12/5/2013 13:53

There is an article in The Times (Sat 11th May) about Ground Rent investing.
It does not mention this Real Estate Investment Trust Ground Rents Income Fund plc (GRIO), but mentions a Property Authorised Investment Fund (a type of OEIC) called TIME Investments Freehold Income Authorised Fund (formerly called Freehold Income Trust), which has a superb long-term performance record. You can't buy that without going through an IFA though, min £5k.

[jonwig] 03/5/2013 07:22

£36.8m placing of 2% Convertible Preference Shares. Essentially 'C' shares which will convert to ords (not 1:1) in about a year's time.

Yield will be index-linked to some measure.

[badtime] 04/4/2013 22:37

Forget tht last post lol

[badtime] 04/4/2013 22:00

Excuse what's the epic code?TIA

[jonwig] 04/4/2013 17:44

August 2011, "4-4.5% yield in a ground rent fund":

[jonwig] 04/4/2013 17:42

Dated 2009:

Ground Rent Investment Yields

Graph 7 shows the performance of ground rent investments over the past 10 years.

The analysis splits those interests having between 80 and 125 years to run from those that have terms of 800 years or more unexpired.

Yields from ground rents in the former category have remained fairly steady over the period. However, from a low of 5.08% in 2006, average yields in the 80 to 125 year market have moved out latterly to 7.23% in 2009.

There has however been a more prevalent reaction to the recession in the 800+ year unexpired market with a notable fall in average yields from a peak of 6.36% in 2007 to 4.33% so far in 2009. This arguably reflects investors' preference for long term secure income in times of turbulence and identifies longer term ground rents as the only area in the residential investment market to show a rise in values over the last two years of economic uncertainty.





I'd think commercial yields a bit lower, in general.

[18bt] 03/4/2013 10:46

jon - agred, they didn't specify the target yield in the listing particulars, just a 90% distribution (which is in the REIT rules anyway). I would hope c4% net of expenses once fully invested, but will be much lower in Y1 and there will be a lag on these new funds being invested.

[jonwig] 03/4/2013 08:17

Yes, I have a few as part of my "alternative assets" allocation.

They say in the RNS: The investment which has taken place in the last three months will put the Company in a good position to achieve its target year-one dividend yield.
But I haven't been able to find anywhere guidance on the expected yield for shareholders. I hope it's better than 2% indexed once fully-invested!

[18bt] 03/4/2013 07:45

Have gradually created a position in these as inflation protection in my SIPP at around £1.04, the last yesterday. Reasonable trading update - index linked yield of 5.4% on the new investment. Hopefully one for the long term.