The Daily Telegraph share tipster Questor this week obligingly gave a puff to the troubled £73.5 million Ground Rents Income Fund plc, which has fallen 31.6% and recently lost a multi-million court action at Manchester’s Beetham Tower.
A spokesman is quoted saying that it has fallen nearly 16% because of “perceptions” over ground rents, while only 4% of the fund is made up of aggressive 10-year doubling ground rents.
The fund, which was set up by property manager Braemar Estates now part of Rendall and Rittner, is an example of how the once pedestrian world of residential property management became big business through the hyper inflation of UK housing stock. It helped turn dull old chartered surveyors into exciting “asset managers”.
Of the ground rent scandal, the company spokesman said: “These excesses are likely to be curtailed by law but existing contracts of the type largely held by this are unlikely to be affected and it can continue to receive its income.
“However, perceptions have weighed on the share price and perhaps half the current discount of 31.6pc can be attributed to them, while the remainder is down to the pandemic.”
In fact, the fund has been floundering for at least three years.
The Telegraph noted that the Ground Rents Income Fund plc is the freeholder at the troubled iconic building, Beetham Tower in Manchester. It lost a multi-million court action action brought by controversial Monaco-based freeholder John Christodoulou, who owns the Hilton Manchester Deansgate at the site.
Were leaseholders also to win exemption from paying to put right dud building repairs, the loss to the fund could be many millions more.
However, the Ground Rents Income Fund plc spokesman said “any costs should not affect the portfolio materially”, the Telegraph reported.
Partner Mike Lewis, examines the blue Manchester v North West Ground Rents Ltd case. This is the first of several case studies he covered in his recent talk at Heathrow Airport for 80 surveyors as part of their CPD training. Being the largest skyscraper outside London, Beetham Tower is Manchester’s most iconic building.
The Questor column added: “The resilience of this trust’s income stream makes it another property-related portfolio well suited to investors who cannot afford to be without income.”
Well … that may include rather a lot of people. But having a punt on residential freeholds at a time when ground rents remain firmly out of favour with all political parties and when thousands of blocks of flats are blighted by the cladding scandal, makes them a tricky proposition.
Questor says “buy”. LKP says hold your horses.
The game may be up for complex speculative investments in other people’s homes – especially those bought with taxpayers’ help.
Hopefully, for UK plc, the game is also up for endlessly inflating resi and other property assets, the family silver, and British business actually begins doing something creative and genuinely wealth-creating.