Riverside Capital, the property portfolio management and investment business, has completed on the £15m sale of its Ground Rents Portfolio, reflecting a 67.6% uplift in value since purchase in 2010.
In a joint venture deal with private equity partners, Connection Capital, the portfolio was originally purchased for £8.95m. Clients invested £3.45m equity alongside a £5.5m debt facility from NatWest.
Following the sale to ground rents operator, Eyre & Johnson, Riverside Capital has delivered clients returns of almost 2.5 times their original investment. During the five year holding period, clients benefitted from a 7% per annum distributable coupon. The investment was managed jointly on investors – behalf by Riverside Capital and its private equity partners Connection Capital.
Ground rents are the regular annual payments paid by leaseholders of flats and houses to the freehold owner. They provide investors with long-term, secure income streams together with low volatility. Rent reviews are linked to RPI, providing investors with a hedge against inflation, and there are also opportunities for capital gains through lease extensions and variations or freehold sales to leaseholders.
Dominic Wright, Chief Executive at Riverside Capital says: We are delighted to have completed the targeted five-year exit strategy so effectively. Not only have we significantly exceeded the returns forecast on exit, but have hit the planned 7% annual distribution every year throughout the hold period. This is another example of the secure investment and healthy returns that the solid management of ground rents can bring.
Claire Madden, Partner at Connection Capital commented: Demand for ground rent investments is very strong, and stock is limited, so this has been a highly attractive and rewarding opportunity for our clients. Ground rents appeal to investors for a whole host of reasons – the underlying security of this type of asset, the regular, inflation-proof rental income, the prospect of windfall profits, and the ability to increase the diversification of their own portfolios.