9th Oct 2019 10:59
(Alliance News) - Ground Rents Income Fund PLC said Wednesday it has agreed conditional contractual arrangements with Vita Group for six of the company's purpose-built student accommodation ground rent assets.
Ground Rents Income will enter into new headleases of between 112 and 250 years unexpired term with Vita, which will assume a direct relationship with the underlying tenants - taking away Ground Rents Income's day-to-day management responsibilities.
Vita will pay GBP1.0 million, structured as GBP400,000 on completion and two further payments of GBP300,000 payable on the first and second anniversaries.
"The income profile and review cycle of the portfolio will remain unchanged with a combination of five and ten yearly inflation-linked rent reviews. Following a rent review , which occurred contemporaneously to this transition, the rent paid by VITA has increased from GBP305,000 to GBP320,000 per annum," Ground Rents added.
At March 31, the assets held a value of GBP9.1 million. Ground Rents said the value of the assets will remain "broadly unchanged" following the GBP1.0 million payment with gross ground rent yield of 3.5%.
Ground Rents continued: "Key supplier agreements are being reviewed to drive operational efficiencies. As a result the agreement between the company and its principal property manager has been renegotiated to generate additional net income to the company of approximately GBP115,000 per annum."
The company's fund manager James Agar added: "The Vita restructure demonstrates the benefit of active asset management. The staged nature of the payments and increased rent support, in conjunction with efficiencies from supplier agreement renegotiations, has demonstrable positive impact on the net operating income from the portfolio."
Shares in Ground Rents Income were 0.2% lower in London on Wednesday at 88.32 pence each.
By Paul McGowan; [email protected]
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