Ground Rents Income Fund has rejected an improved proposal to buy the company, which values it at around £35.9m.

The board said the possible offer, by Victoria Property Holdings (which made a previous proposal in early January that valued it at £32.5m), “remains unattractive and materially undervalues the company”.

Ground Rents’ NAV at 30 September 2024 was 59.0p per share, which means that the latest proposal at 37.5p per share is at a 36.4% discount to NAV. It is also a 13.6% premium to last night’s closing price.

Ground Rents’ NAV has been under downward pressure for many years and was down 34.5% over the year (from 90.1.p on 30 September 2023).  In annual results, the company highlighted that the scale of non-recoverable remediation costs in relation to leasehold reform and outstanding building safety remediation projects is unclear.

Low levels of transactional evidence across the residential ground rent market was also a valuation factor. Furthermore, 97% of the portfolio valuation (which was down 30.5% over the year to £71.5m) remains subject to an industry-wide Material Uncertainty Clause.

[QD comment: If an offer is made for the company, shareholders need to weigh up the offer price and certainty this gives with how much capital is likely to be returned in the company’s winding up process (which is extremely difficult due to the unknown costs involved) and the timescale of any return.]

In its latest proposal letter, Victoria Property also requested an extension to the Put Up or Shut Up deadline and access to due diligence information. The board also rejected this stating that it believes there to be considerable information on the business, strategy and financial results already in the public domain, which should enable Victoria Property to put forward a proposal capable of recommendation, within the 28-day period set out under the UK Takeover Code.

Therefore, Victoria Property has until 5 February 2025 to either announce a firm intention to make an offer for Ground Rents or announce that it does not intend to make an offer.