Ground Rents Income moves to Schroders

Ground Rents Income moves to Schroders – Ground Rents Income is moving its management contract from Brooks MacDonald to Schroder Real Estate Investment Management. The management team is going to move across as well. The announcement says that Brooks MacDonald is stepping back to focus on its core business. The board listed several reasons for choosing Schroders:

  • Large and established manager with long experience managing listed real estate investment trusts;
  • Long-term track record of outperformance through real estate cycles;
  • The ability to retain the existing management team;
  • Strong governance and risk management processes to support the company dealing with regulatory and legislative change in the sector;
  • Active asset management capabilities to deal with complex situations such as the impact of Carillion’s liquidation and related litigation at Beetham Tower in Manchester; and
  • Simplification of the current investment management fee arrangements so that there is greater alignment of interests between the manager and GRIO shareholders.

The board sees the following benefits to investors:

  • Stability – Schroders provides a stable platform for the current management team;
  • Depth of resource – Combining the current management team with Schroders’ extensive resources provides both continuity and greater depth of experience to the GRIO mandate;
  • Experience – Schroders Group has managed real estate assets since 1971 and manages eight UK-listed investment trusts. The Real Estate Group manages three listed real estate investment trusts in the UK and Continental Europe;
  • Distribution – Schroders has strong relationships with major GRIO shareholders with an extensive distribution capability to support the long-term growth of the company; and
  • Performance and focus – Schroder Real Estate has a long-term track record of outperformance

Revised fee

Schroders has been appointed for an initial period of 3 years to ensure management continuity, following which the termination notice period will be 1 year. The board has agreed a simplified, tiered fee for Schroders of 1.0% of NAV up to GBP200 million, 0.9% between GBP200 million and GBP400 million, and 0.8% above GBP400 million.

However, for the initial twelve-month period, the fee will be 0.9% of NAV with the potential to earn up to 1.0% of NAV subject to delivering income-enhancing initiatives; upon completing the purchase of a property which has been introduced by Schroders, and for which no third-party introductory fees are payable, Schroders will be entitled to receive an acquisition fee of 1.0% of the acquisition price paid; and all additional payments and commissions currently received by the old managers will be received by GRIO.

Simon Wombwell (who is a Brooks Macdonald employee) intends to resign as a director following the appointment of Schroders.

Malcolm Naish, chairman, commented: “The board is delighted to announce its intention to appoint Schroders as the company’s investment manager and AIFM. 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, Schroder Real Estate Investment Management Limited, commented: “Ground Rents Income Fund plc’s diversified portfolio of ground rents provides long-term, stable income with high inflation-linkage which is differentiated from other Schroders’ real estate products. 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. Furthermore, the residential sector is a growing part of the institutional real estate market and the appointment fits well with Schroders’ broader Real Estate strategy to be closer to our assets“.

GRIO : Ground Rents Income moves to Schroders

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