Ground Rents Income Fund plc - Interim results for the six months to 31 March 2020 James Agar, Fund Manager - Schroders

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Ground Rents Income Fund plc - Interim results for the six months to 31 March 2020 James Agar, Fund Manager - Schroders
Ground Rents Income Fund plc
Interim results for the six months to 31 March 2020
James Agar, Fund Manager
                                                                             Marketing material for professional investors or advisers only.
July 2020                                         Throughout this presentation Ground Rents Income Fund plc will be referred to as ‘GRIO’.
Ground Rents Income Fund plc - Interim results for the six months to 31 March 2020 James Agar, Fund Manager - Schroders
Agenda

01   Overview

02   Income analysis

03   Market overview

04   Leasehold and regulatory reform

05   Beetham Tower

06   Summary

07   Appendix

1
Ground Rents Income Fund plc - Interim results for the six months to 31 March 2020 James Agar, Fund Manager - Schroders
Overview
Ground Rents Income Fund plc - Interim results for the six months to 31 March 2020 James Agar, Fund Manager - Schroders
Investment case
Inflation linked returns
Ground Rents Income Fund Plc                                                                                Illustrative ground rent revenue – RPI sensitivity
                                                                                                            £m
                        – Highly-diversified, long-term portfolio of approximately 19,000                   7.5
 Diversified
                          units across 400 assets with a low default risk
                                                                                                            7.0
                        – Upwards only rental increases over all durations given the
 Predictable                                                                                                6.5
                          fundamentals of the instruments

                                                                                                            6.0
 Long-term              – Weighted average unexpired lease term of 345 yrs
                                                                                                            5.5

                                                                                                            5.0
 Non-correlative        – Uncorrelated to – residential, commercial or alternative assets
                                                                                                            4.5

                        – c.70% of the portfolio is index-linked, of which c.90% is RPI
 Inflation-hedged                                                                                           4.0
                        – Embedded growth – 40% of the portfolio will be reviewed by 2025
                                                                                                                  2019   2020   2021   2022   2023      2024   2025   2026   2027   2028     2029

 Income                 – 3.96p per share dividend                                                                         -2% RPI            -1% RPI            0% RPI             1% RPI
                                                                                                                           2% RPI             3% RPI             4% RPI             5% RPI

        Assuming future RPI inflation of 2.5% per annum, ground rent income should increase c.16%
                  over next 6 years or an annualised figure matching that of RPI at 2.5%
Source: Schroders, ONS (figures as at 28 February 2019), June 2019. Chart for illustrative purposes only.

3
Ground Rents Income Fund plc - Interim results for the six months to 31 March 2020 James Agar, Fund Manager - Schroders
GRIO interim results to 31 March 2020
Summary
          Company strategy                                    Performance                                Asset management                                   Balance sheet

                                                          NAV 31 March 2020                         Restructuring of head-leases with
                                                                                                                                                     Termed Loan refinanced and
      Defensive, long dated secure,                    £106.8 million or 110.1 pps                 VITA Group, delivering £1.0 million
                                                                                                                                                     extended to 2025 at a margin
      inflation index linked income                                                               in additional revenues with reduced
                                                                                                                                                           of 2.8% vs. 3.4%
                                                      A decrease of 1.2 pps or 1.0%                         operational risk

                                                                                                                                                      £25 million loan comprising
      Ensure shareholders interest
                                                    40% of ground rent income to be                  Beetham Tower, Manchester –                 £12.5 million term and £12.5 million
      are represented in leasehold
                                                     reviewed in the next five years                  Planning consent granted                      RCF – £19.5 million drawn with
         and regulatory reform
                                                                                                                                                    capacity operational flexibility

                                                                                                      MHCLG Building Safety Team                     24.4% LTV on charged assets
                                                     Two quarterly dividends paid
                                                                                                                                                    (£19.5m), vs. covenant LTV 50%
       Demonstrate Best in Class                       in line with full year target
                                                                                                          Building Safety Fund
     residential asset management
                                                                                                                                                        Portfolio net LTV 11.4%
                                                   Robust covid-19 income collection
                                                                                                         Clear Covid-19 strategy                         ICR of 475% vs 270%

Past performance is not a guide to future performance and may not be repeated. The value of investments and the income from them may go down as well as up and investors may not get back
the amount originally invested.
Source: Schroders, July 2020.

4
Ground Rents Income Fund plc - Interim results for the six months to 31 March 2020 James Agar, Fund Manager - Schroders
Strategic focus
Focus on growing net income, risk management and longer term strategy
                                                                                        Actions COMPLETED
                                                                                             Refinance
                                                                              Reduced cost and extended term providing
                                                                                 financial and operational flexibility

                                  Ongoing review of strategy given rating                                                Strategic review
                                                             RPI consultation                                            Building Safety Bill

                                                      Actions Ongoing                                                           Actions COMPLETED
                                                   Rerating the shares                                                          Additional Income
                                                       Working to close                                                         VITA Headlease
                                                       discount to NAV                                                          Supplier Agreements

                                       Covid-19 – income and cost analysis                                              Best-in-class management
                                             Resolve Beetham Manchester                                                 Delivering value to consumers

                                                                                           Actions Ongoing
                                                                                          Leasehold Reform
                                                                                     Interaction with Government,
                                                                                       Law Commission and CMA

                  Strategy to increase shareholder total returns and deliver a fully covered dividend
Source: Schroders May 2020. Shown for illustrative purposes only and should not be viewed as a recommendation to buy or sell.

5
Ground Rents Income Fund plc - Interim results for the six months to 31 March 2020 James Agar, Fund Manager - Schroders
Valuation and NAV at 31 March 2020
31 March 2020 12 month NAV return +0.7%
– Portfolio valuation of £122.6 million representing a fall in value of £0.3 million or -0.2% compared to September 2019
– Benchmark years purchase (‘YP’) remained unchanged with 10 and 25 year RPI valued at 28.0 YP and 25.0 YP respectively
  and 25 year doubling at 24.0 YP
– NAV decrease of 1.1% to £106.8 million or 110.1 pps

                                                                 £m                  pps                 %     Comments

 NAV as at 30 September 2019                                  108.0                111.3

 Investment property valuation                                 (0.4)                (0.3)              (0.3)   Bi-annual valuation decrease as at 31 March 2020

 EPRA earnings¹                                                  1.1                  1.1               1.0    EPRA earnings for the 6 months to 31 March 2020

 Dividends paid                                                (1.9)                (2.0)              (1.8)   2 distributions: Q4 FY2019 and Q1 FY2020

 NAV as at 31 March 2020²                                     106.8                110.1               (1.1)   Reflects ordinary shares of 97,006,497

Source: Schroders July 2020.
¹EPRA earnings being operating profits attributable to shareholders excluding property gains/losses.
²Valuation included industry standard Market Uncertainty clause which has subsequently been removed.

6
Ground Rents Income Fund plc - Interim results for the six months to 31 March 2020 James Agar, Fund Manager - Schroders
Compliance disclosure requirement
Performance-NAV to NAV (per share) plus dividends paid
 Property portfolio total returns1                               12m to Mar 2020          12 m to Mar 2019         12 m to Mar 2018          12 m to Mar 2017          12 m to Mar 2016

 Ground Rents Income Fund Plc                                                  +0.7                       -6.0                     -7.3                    +20.1                     +15.7

Ground Rents Income Fund Plc – Risk Considerations:
The Company borrows for investment purposes. This will magnify any gains or losses made by the Company.
The Company has no maturity date. The Company may only be terminated by a continuation vote, a shareholders’ voluntary liquidation or by a compulsory liquidation if the
Company were unable to pay its debts. The Company owns a portfolio of assets with the income generated from the collection of ground rents.
Potential legislative reform may impact the Company’s value and future income streams. However, any reform would be required to strike a fair balance between
leaseholders and landlords with legitimate property interests.
The Company invests in real estate which may be viewed as a higher risk and illiquid investment and may, therefore, be adversely affected by a decrease in market liquidity
for the assets in which it invests.
You may not be able to sell your product easily or you may sell at a price that significantly impacts on how much you get back. This product does not include any protection
from future market performance so you could lose some or all of your investment.
The Company will invest solely in property located in the UK. This can carry more risk than investments spread over a number of countries. The performance of the
Company would be adversely affected by a downturn in the property market in terms of capital value or a weakening of rental yields. The Company invests in real estate
which may be viewed as a higher risk and illiquid investment and may, therefore, be adversely affected by a decrease in market liquidity for the assets in which it invests.
The Company has the ability to use gearing as part of its investment strategy. The use of gearing will increase the risk profile of the Company and the volatility of the value
of Shares, and will amplify losses in the event of a decline in gross asset values. Gearing may create significant underperformance, particularly in times of a falling property
market. Borrowing costs may, from time to time, exceed returns on property.

Past performance is not a guide to future performance and may not be repeated. The value of investments and the income from them may go down as well as up and investors may not get back
the amounts originally invested.
Source: Schroders, Refinitiv, 31 December 2019.
¹Schroders, NAV to NAV (per share) plus dividends paid.

7
Income analysis
Covid-19 rent collection – to 01 July 2020
£3.11m of Ground Rents collected in the financial year
Ground rent collected and outstanding
     18%
                                                                                                       – Income collection has remain robust and in line with
     16%                                                                                                 2019
     14%
                                                                                                       – No material increase in requests for forbearance or
                                                                                                         payment holidays
     12%
                                                                                                       – Since 1 January 2020 64% of the current year’s total
     10%                                                                                                 ground rent has been collected
                                                                                                       – Of the remaining c£1.25m income in this financial year,
      8%
                                                                                                         £0.7m relates to the eight VITA headleases
      6%                                                                                               – External rent collection specialists have amended
      4%
                                                                                                         Covid-19 collection processes in place
                                                                                                       – The company will review future dividends in light of
      2%
                                                                                                         Covid-19 and its impact on income collection
      0%                                                                                                 performance
              Jan     Feb    Mar     Apr    May      Jun    Jul   Aug   Sep     Oct    Nov       Dec
                    Arrears % - 2018               Arrears % - 2019           Arrears % - 2020

Source: Rendall & Rittner, Schroders, July 2020.

9
Market overview
Covid-19 – Impact on UK real estate
Record fall in UK monthly GDP
Change in GDP in 2020
Q/Q                                                                                   – First Global Health Crisis in living history-outcome uncertain
 20%                                                                                  – The UK economy is in recession following lockdown imposed on
 15%                                                      13%                           23 March 2020
                                                                                      – Governments face a trade-off between getting the economy back
 10%
                                                                                        to work and the health risks Covid-19
  5%                                                                                  – The key issue being scale to which the lockdown, and the ensuing
                                                                                 2%     recovery, affects the economy and unemployment
  0%
             -2%
                                                                                      – Government borrowing to cushion unemployment impact and the
 -5%
                                                                                        loss of income is unsustainable
-10%                                                                                  – Reduction in real estate market liquidity and transactions, resulting
-15%
                                                                                        in valuers invoking Market Uncertainty clauses
                                                                                      – Yield expansion likely across most traditional sectors as the
-20%                                    -17%
                                                                                        economic outlook deteriorates
-25%                                                                                  – Assets with short unexpired leases are likely to see a bigger fall in
                   Q1                    Q2               Q3                Q4
                                                                                        value than assets with secure, long-dated income
                                                  2020
                                                                                      – GRIO’s secure, long-dated, uncorrelated, index-linked portfolio
                        Other professional forecasts            Schroders               expected to be relatively well positioned

Source: Consensus Economics, ONS, Schroders. June 2020.

11
The Gateway, Leeds

                     Residential ground rent market commentary
                     Annuity-style cash flows vs. leasehold reform

                     – Strong demand for annuity-style income, but residential ground rent
                       transactional volumes have remained low since 2018
                     – Asset pricing has reduced and now stabilised, with 12 month NAV broadly flat
                     – The Material Valuation Uncertainty clause included in the March 2020 valuation
                       has been removed
                     – Enfranchisement clarity saw some confidence return with large portfolios
                       being marketed
                     – Greater certainty required on Covid-19, leasehold reform and the CMA
                       investigation
                     – Several participants continue to be active during Covid-19
                     – Covid-19 will create opportunities, accelerating the polarisation between
                       institutional quality assets and the rest of sector
                     – Consider opportunities to invest the RCF headroom to support NAV and
                       dividend cover

                     Source: Schroders, July 2020.

     12
GRIO dividend yield vs Index-linked yields
Current yield margin is 1.44x the five year average
Yield
 10

     8

     6

     4

     2

     0

  -2

  -4
         Dec 14

                                                Dec 15

                                                                                    Dec 16

                                                                                                                         Dec 17

                                                                                                                                                             Dec 18

                                                                                                                                                                                                 Dec 19
                                    Sep 15

                                                                           Sep 16

                                                                                                                Sep 17

                                                                                                                                                    Sep 18

                                                                                                                                                                                        Sep 19
                  Mar 15

                           Jun 15

                                                         Mar 16

                                                                  Jun 16

                                                                                              Mar 17

                                                                                                       Jun 17

                                                                                                                                  Mar 18

                                                                                                                                           Jun 18

                                                                                                                                                                      Mar 19

                                                                                                                                                                               Jun 19

                                                                                                                                                                                                          Mar 20

                                                                                                                                                                                                                   Jun 20
                                             Yield margin                                    GRIO dividend yield                                     10 Year Index-linked Gilt Yield

Source: Fixed Income Investor, Schroders. July 2020.

13
Covid-19 scenario probabilities
Implications for 2021 RPI

                                                                                       – W shaped economic recovery is the primary
                                                  11%                                    risk (14%) from a ‘second wave’ of Covid-19.
                                                                                         2021 RPI – 3.4%
                                                         6%
                                                                                       – V-shape recovery is the next likely (11%) as
                                                              9%                         the private sector responding to the lifting
                                                                                         of lockdowns. 2021 RPI – 5%
                                 55%                          5%
                                                                                       – A Eurozone debt crisis is third (9%) and with
                                                                                         lower risks being attached to the remaining
                                                        14%
                                                                                         scenarios. 2021 RPI – 4%

           Sharp global recovery (V)                    MMT fuelled fiscal expansion
           Eurozone debt crisis                         Private sector scarring (L)
           Coronavirus second wave (W)                  Baseline

Source: Schroders Economics Group, 28 May 2020.

14
Leasehold and regulatory reform
Clapham One, London

                      Leasehold reform
                      Ministry of Housing, Communities & Local Government
                      and enfranchisement
                      – The Law Commission (‘LC’) published their report on enfranchisement premium valuation in
                        January 2020
                      – Initial assessment was positive for GRIO with little impact on the long-dated ground rents
                      – The LC’s three primary options involve the inclusion or not of marriage value or hope value
                      – Potential impact on GRIO is minimal as the value of the ‘term’ and ‘reversion’ remain in
                        all options
                      – The report gives clear direction and removes uncertainty around value destructive elements
                        of the process
                      – Negative impact on the Company by reform may be mitigated by:
                          – 345 Year Weighted Average Unexpired Lease Term
                          – Median ground rent is £250 p.a.
                          – 96% of the Company's ground rent reviews are not onerous
                          – Project Pacific – Asset Management to amend doubling reviews
                      – Next steps – Industry will shortly challenge the view that ground rents over 0.1% of the
                        property value are onerous

                      Source: Schroders, July 2020.

    16
Brentford Lock, West London

                              Competition and Markets Authority (‘CMA’)
                              Leasehold mis-selling investigation

                              – February 2020 CMA report focused on the mis-selling of leasehold houses and making few
                                reference to apartments
                              – Specific concern highlighted in relation to ground rent:
                                  – High initial ground rents that may increase significantly over time
                                  – High or escalating ground rents that mean a long-lease may become an ‘assured tenancy’
                                    (Housing Act 1988)
                                  – Significant reservations about RPI linked increases to ground rent
                              – The CMA is still carrying out its investigation and is “preparing to take enforcement action”
                              – Doubling ground rent asset management plan –offering a variation to the lesser of doubling
                                or RPI inflation
                              – Assured tenancy policy – The Company does not ordinarily seek possession using the
                                Housing Act 1988
                              – Leaseholder Pledge makes specific reference to RPI as the metric to which ‘onerous rents’
                                will be changed to
                              – Next steps – Consideration being given to A1P1 in relation to any possible CMA action

                              Source: Schroders and CMA, July 2020.

     17
Beetham Tower, Manchester
Beetham Tower, Manchester

                            North West Ground Rents Limited (‘NWGR’)
                            Ongoing litigation

                            – June 2014 – Issue identified regarding a failure of structural sealant
                            – January 2019 – NWGR lost a High Court case and was ordered to repair the building in
                              a specific manner (Option A) by 31/07/2020
                            – NWGR continues with the mobilisation for Option A, quotations ahead of expectation
                              at £8 million due to weather risk
                            – November 2019 – Mediation took place, without conclusion
                            – May 2020 – NWGR granted planning consent for Option C and has made an
                              application to the Court for permission to vary the type of repair and the timeline for
                              completion
                            – June 2020 – Option C decision deferred, trial in September 2020
                            – Securing court approval for Option C could benefit all stakeholders
                            – NWGR is reliant on the support of GRIO to finance further legal action and to comply
                              with the judgment
                            – Without a resolution there is a risk that GRIO’s support will be withdrawn and
                              NWGR may become insolvent

                            Source: Schroders, June 2020.

    19
Summary
VITA First St, Manchester

                            Summary
                            Focus on closing the discount to NAV

                            – Against an uncertain economic backdrop GRIO is benefiting from its defensive
                              characteristics and uncorrelated returns
                            – Strategic focus is growing reoccurring income and achieving full dividend coverage
                            – Assets offering defensive income characteristics will continue to see strong demand
                            – Dividend in line with strategy, future payments will be monitored in light of Covid-19 impact
                              on rent collection
                            – Headwinds from leasehold reform and the CMA investigation continue to impact the
                              Company and discount to NAV
                            – Key strategic objectives:
                                – Close discount – emphasis on secure, defensive and differentiated strategy and dividend
                                  track record
                                – Reform – continued interaction with Government, LC and CMA
                                – NWGR – challenging and complex litigation
                                – Industry Code of Conduct, Health & Safety policy, ‘Golden Thread’ and Fire Safety Bill

                            Source: Schroders, July 2020.

     21
Appendix
Rent profile
Ground rent income
£2,500,000

£2,250,000

£2,000,000

£1,750,000

£1,500,000

£1,250,000

£1,000,000

     £750,000

     £500,000

     £250,000

          £-
                   January           February         March           April                May             July           August         September         October         November          December

                                      January     February       March             April           May            June         July      August      September       October    November       December

 Monthly rent due ('000)            £2,384,092     £73,990     £214,528        £483,529          £43,082     £99,238      £358,459      £73,990       £813,381       £138,342     £37,891        £95,063

 Cumulative rent                    £2,384,092   £2,458,082   £2,672,611      £3,156,140    £3,199,222     £3,298,460    £3,656,919   £3,730,909     £4,544,290   £4,682,632    £4,720,523     £4,815,586

 Cumulative %                          49.51%       51.04%       55.50%          65.54%          66.43%       68.50%        75.94%       77.48%         94.37%        97.24%       98.03%        100.00%

Source: R&R, Schroders July 2020.

23
GRIO portfolio
Portfolio breakdown based on total portfolio ground rent income
Asset location                                                                                           Type of ground rent review
                                              1.5%

                                          5.3%                                                                                              7.0%
                                  9.8%                                                                                               7.2%
                                                             30.6%

                            10.9%                                                                                                16.2%

                              12.2%                                                                                                                  69.6%

                                                   29.7%

          North West                                         North East
          Midlands                                           London
                                                                                                                  Index-linked       Doubling      Fixed     Flat (no review)
          South West                                         South East (exc. London)
          Wales

Source Schroders July 2020. Shown for illustrative purposes only and should not be viewed as a recommendation to buy or sell.

24
GRIO share price and NAV
Currently trading at a 26% discount to NAV1
145                                                                                                                                                                                                         20%
140
135
                                                                                                                                                                                                            10%
130
125                                                                                                                                                                                        January 2020
                                                                                                                                                                                           LC report on
120                                                                                                                                                                                                        0%
                                                                                                                                                                                           enfranchisement
115                                                                                                                                                                                        premiums
110
                                                                                                                                                                                                            -10%
105
100
 95                                                                                                                                                                                                         -20%
 90
 85                                                February 2017                        December 2017                             October 2018
                                                   Media coverage begins                Tackling unfair                           Implementing                                                              -30%
 80                                                                                     practices in leasehold                    reforms to leasehold
 75
 70                                                                                                                                                                                                         -40%
      Apr 2016

                                                       Apr 2017

                                                                                                    Apr 2018

                                                                                                                                                    Apr 2019

                                                                                                                                                                                                 Apr 2020
                            Oct 2016

                                        Jan 2017

                                                                             Oct 2017

                                                                                         Jan 2018

                                                                                                                            Oct 2018

                                                                                                                                         Jan 2019

                                                                                                                                                                          Oct 2019

                                                                                                                                                                                     Jan 2020
                 Jul 2016

                                                                  Jul 2017

                                                                                                                 Jul 2018

                                                                                                                                                               Jul 2019
                                            Share price (LHS)                                       NAV (LHS)                                       Discount/Premium (RHS)

Past performance is not a guide to future performance and may not be repeated.
Source: Refinitiv, Schroders, 1 July 2020.
1Most recent NAV per ordinary share (undiluted) as at 30 June 2020, 110.1 pence; share price at 30 June 2020 82 pence.

25
HM Treasury

              Retail Price Index (RPI)
              Reforming the UK inflation measure

              – In September 2019 the Government agreed with the UK Statistics Authority (‘UKSA’) to
                reform RPI
              – The Chancellor pledged to bring RPI inline with consumer prices including housing costs
                (‘CPIH’)
              – Reform unlikely to take place before 2025 due to impact on the index-linked gilt market
              – The Chancellor rejected proposal from UKSA to cease publication of the RPI altogether
              – Investors holding RPI-linked assets or obligations likely to be impacted as CPIH is typically
                lower than RPI
              – 62% of GRIO ground rent income is directly linked to RPI
              – Retrospective action on current RPI linked contracts may be difficult to enforce without
                compensation
              – A consultation on whether reform should be made before 2030 has begun and will close on
                21 August 2020
              – The Government and UKSA will respond to the consultation before the parliamentary
                summer recess

              Source: Schroders, FT.com and HM Treasury, July 2020.

    26
UK inflation
UK CPI and RPI forecasts
4.5
4.0
3.5
3.0
2.5
2.0
1.5
1.0
0.5
0.0
                            May 2017

                                                  Sep 2017

                                                                                              May 2018

                                                                                                                    Sep 2018

                                                                                                                                                                May 2019

                                                                                                                                                                                      Sep 2019

                                                                                                                                                                                                                                  May 2020

                                                                                                                                                                                                                                                        Sep 2020

                                                                                                                                                                                                                                                                                                    May 2021

                                                                                                                                                                                                                                                                                                                          Sep 2021

                                                                                                                                                                                                                                                                                                                                                                      May 2022

                                                                                                                                                                                                                                                                                                                                                                                            Sep 2022
      Jan 2017

                                                                        Jan 2018

                                                                                                                                          Jan 2019

                                                                                                                                                                                                            Jan 2020

                                                                                                                                                                                                                                                                              Jan 2021

                                                                                                                                                                                                                                                                                                                                                Jan 2022
                                                             Nov 2017

                                                                                                                               Nov 2018

                                                                                                                                                                                                 Nov 2019

                                                                                                                                                                                                                                                                   Nov 2020

                                                                                                                                                                                                                                                                                                                                     Nov 2021

                                                                                                                                                                                                                                                                                                                                                                                                       Nov 2022
                 Mar 2017

                                                                                   Mar 2018

                                                                                                                                                     Mar 2019

                                                                                                                                                                                                                       Mar 2020

                                                                                                                                                                                                                                                                                         Mar 2021

                                                                                                                                                                                                                                                                                                                                                           Mar 2022
                                       Jul 2017

                                                                                                         Jul 2018

                                                                                                                                                                           Jul 2019

                                                                                                                                                                                                                                             Jul 2020

                                                                                                                                                                                                                                                                                                               Jul 2021

                                                                                                                                                                                                                                                                                                                                                                                 Jul 2022
                                                                                                                                                                                  RPI                                             CPI

– 40% of ground rent income due to be reviewed over the next five years
– Sharp drop in near term inflation forecast due to falling energy prices and weaker consumer demand
– Inflation forecast to rise and remain elevated as lockdown is lifted and demand is met by supply disruptions

Source: ONS, Schroders July 2020 – Shown for illustrative purposes only and should not be viewed as a recommendation to buy or sell.

27
Leasehold reform timeline
Past, present and future
                   –   Feb: Government Housing White Paper           –   Apr: Government responds to consultation 2   –   Mar: Select Committee report on leasehold       –   Jan 20: Law Commission published their
                       published                                         (proposes regulation of managing agents)         reform (recommends a cap on existing                report on enfranchisement
                   –   Jun: Grenfell Tower tragedy                   –   May: Hackitt review published (proposes          ground rents of £250/0.1%, zero future          –   Positive for GRIO – little impact on the
                                                                         new regulatory framework, including              ground rents, and review by Competition             long-dated ground rents
                   –   Jul: Hackitt Review; and Government                                                                and Markets Authority (CMA))
 Reform timeline

                       leasehold consultation (1)                        Duty holders)                                                                                    –   Feb 20: CMA investigation into
                                                                     –   Sep: Law Commission leasehold                –   Jun/Jul: Government building safety                 leasehold housing market
                   –   Oct: Government managing agent                                                                     consultation (4);
                       consultation (2)                                  enfranchisement consultation                                                                     –   March 20: BPF working group on
                                                                     –   Oct: Government leasehold reform             –   CMA begins review into home buying process          Enfranchisement strategy with LC
                   –   Dec: Government responds to consultation 1
                       (proposes zero future ground rents and            consultation (3)                             –   Government responds to Select Committee         –   May 20: Government announces £1bn
                       banning sale of leasehold houses)             –   Dec: Law Commission Commonhold                   (leasehold remains a legitimate form of home        Building Safety Fund to remediate
                                                                         consultation                                     ownership, rebuffs retrospective legislation)       unsafe non-ACM sites over 18 metres
                                                                                                                                                                          –   June 2020: BPF Cladding Safety
                                                                                                                                                                              working group

                                         2017                                              2018                                             2019                                           2020 and beyond

                   –   Sep: GRIO launches doubling ground rents      –   Apr: Leasehold Reform Group (LRG) formed     –   Feb: GRIO attends Law Commission                –   2020: Fire Safety Bill
                       asset management                              –   Jun: GRIO meets civil servant leading the        symposium on proposals to reform                –   Continued interaction with Government,
                   –   Oct: GRIO and other large scale freeholders       Government’s leasehold project                   Commonhold                                          CMA and Law Commission
                       and developers meet the then Secretary of     –   Jul: GRIO attends Industry Roundtable        –   Mar: GRIO and other large scale freeholders     –   Detailed response to CMA with advice
                       State, Sajid Javid MP, to discuss leasehold       with the then Secretary of State,                meet with the then Housing Minister,                from CMS
 GRIO action

                       reform proposals                                  James Brokenshire MP                             Heather Wheeler MP
                                                                                                                                                                          –   Meeting with Housing Minister
                                                                     –   Jul: GRIO attends LRG and Winckworth         –   Feb: GRIO attends LRG seminar on draft
                                                                                                                          Code of Conduct                                 –   RPI Reform Consultation
                                                                         Sherwood seminar on leasehold reform
                                                                                                                      –   May: Schroders appointed as AIFM                –   Industry Code of Conduct
                                                                     –   Oct: Representations by GRIO and LRG
                                                                         to Government and Select Committee           –   Jun: GRIO signatory of Government’s             –   Continue with doubling ground rents
                                                                                                                          Public Pledge for Leaseholders                      asset management
                                                                                                                      –   Aug: Announcement of review of the              –   Best-in-class asset management –
                                                                                                                          Company’s strategy                                  Golden thread, digitisation of O&Ms

Source: Schroders, May 2020.

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Wapping Wharf, Bristol

                         Project Pacific and leasehold pledge
                         Doubling ground rent asset management

                         Project Pacific (PP)
                         – Offers were initially made to relevant leaseholders in May 2018, with further letters in
                            September 2018 and March 2019
                         – At 1 May 2020, 513 offers across 30 sites have been taken up:
                             – 332 offers have been completed with the necessary Deeds of Variation recorded at
                               Land Registry
                             – 144 uncompleted offers are ‘live’
                             – The remaining 37 offers are where the leaseholders solicitor has stopped responding
                               to GRIO
                         – Considering amending offer from RPI to CPIH given comments in the CMA investigation
                         Leasehold pledge
                         – Public Pledge for Leaseholders effectively extends PP indefinitely. Pledge viewed as a first
                           step towards establishing a legally enforceable Code of Practice
                         – The Pledge makes specific reference to RPI as the metric to which ‘onerous rents’ will be
                           changed to

                         Source: Schroders, July 2020.

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