Real estate trust hit by government ban on unfair leases and collapse of Carillion seeks support of larger investment group with its fund management team under James Agar moving to Schroders,
Ground Rents Income Fund (GRIO) has dropped Brooks Macdonald as its fund manager and switched to Schroders which is hiring its investment team led by James Agar.
The move follows a tough two years for the specialist real estate investment trust which buys long-dated ground rents. In 2017 it was hit by government moves to ban unfair leases in residential properties and more recently has been caught up in a dispute at Beetham Tower in Manchester following last year’s collapse of facilities manager Carillion.
In a stock exchange statement, GRIO said Brooks Macdonald (BRK), a £235 million investment manager, would step back to focus on its core offerings following the appointment of Schroder Real Estate Investment Management, the property am of the £7.9 billion FTSE 100 fund management group.
A review of investment strategy and dividend policy will follow in order to maximise shareholder total returns in the £93 million listed fund which have fallen 13.5% in the past 12 months.
Simon Wombwell, Brooks Maconald’s business development director, will resign from GRIO’s board and an independent director sought.
GRIO said moving to a larger group with wide experience and a good track record in property markets would benefit the company.
It also cited Schroder’s strong governance and risk management processes to help GRIO in ‘dealing with regulatory and legislative change in the sector’ and the group’s capacity to ‘deal with complex situations such as the impact of Carillion’s liquidation and related litigation at Beetham Tower in Manchester’.
GRIO’s board has negotiated a simpler annual fund management charge with Schroders. It will be paid 1% of net assets up to £100 million, falling to 0.9% up to £400 million and 0.8% above that. For the first year, however, the charge will be 0.9% on the entire portfolio with the potential to rise to 1% ‘subject to delivering income-enhancing initiatives’.
Chairman Malcolm Naish said: ‘Schroders has a strong track record and over the course of this process demonstrated its commitment to the fund. As a result we believe that Schroders combined with the current management team are well placed to support Ground Rents Income Fund plc during the next stage of its development.’
Nick Montgomery of Schroder Real Estate Investment Management Limited, added: ‘We recognise the regulatory challenges that face the industry, but believe that we have the platform to support the existing team to continue to be a best-in-class operator in the leasehold sector as evidenced by their commitment to the Public Pledge for Leaseholders.’
GRIO shares shed 1.75p or 1.8% to 95.5p on a 4.1% yield and a wide 16% discount below net asset value.
Brooks Macdonald shares slipped 15p or 0.9% to £16.90 and Schroders (SDR) firmed 7p to £29.41.