Unaudited Portfolio Valuation as at 31 March 2026

Ground Rents Income Fund plc (AIM:GRIO) has announced an unaudited portfolio valuation of £29.5 million as of 31 March 2026, marking a substantial 42.3% decline from £51.1 million six months prior. This significant reduction is primarily attributed to proposed leasehold reform legislation that could impose caps on ground rents, which has created considerable uncertainty in the market. The valuation reflects a net initial yield of 15.8% and a Years Purchase multiplier of 5.9, based on annual ground rents of £5.0 million. While the reported contracted rent increased by 4.2% over the period, this is overshadowed by the broader implications of the proposed reforms, which threaten to fundamentally alter the economics of ground rent investments.

In the context of previous disclosures, this announcement reveals a stark decline in the company's asset valuation. The last reported valuation stood at £51.1 million, which was already a significant figure, but the current valuation of £29.5 million indicates a worrying trend of devaluation. The company had previously indicated a stable outlook, but the drastic reduction in valuation suggests a failure to meet earlier expectations. The ongoing uncertainty surrounding leasehold reform, which was highlighted in the government's draft Commonhold and Leasehold Reform Bill published in January 2026, has clearly impacted investor sentiment and the market's perception of the company's future cash flows.

Financially, Ground Rents Income Fund has made some progress in reducing its debt, with disposals totaling £14.8 million over the past two years, which has decreased its loan facility with Santander UK plc to £3.9 million. This reduction in debt is a positive development, as it demonstrates the company's ability to manage its liabilities amid a challenging market environment. However, the company's cash reserves currently stand at £5.6 million, which raises questions about its funding runway and ability to navigate the anticipated impacts of the proposed reforms. The company has indicated that it is considering using its cash reserves for further loan repayments, but this decision will depend on its working capital requirements, which adds another layer of uncertainty to its financial health.

When comparing Ground Rents Income Fund to its peers, the valuation metrics suggest that the company is currently facing significant challenges. The reported net initial yield of 15.8% is relatively high, indicating that the market is pricing in considerable risk. In contrast, peers in the property investment sector, such as Ground Rents Income Fund, may be trading at lower yields due to more stable portfolios or less exposure to legislative risks. For instance, Ground Rents Income Fund's market cap of £15.2 million positions it within a competitive landscape where other property investment firms may offer more attractive valuations or growth prospects. The ongoing legislative uncertainty could lead to a further widening of the valuation gap between GRIO and its peers, particularly if the proposed reforms materialize and negatively impact the ground rent market.

The company's execution record has been mixed, with the recent disposals indicating a strategic shift towards improving portfolio liquidity. However, the need to sell assets in a declining market raises concerns about the sustainability of this strategy. The judicial review challenging existing enfranchisement provisions is another area of concern, as the High Court dismissed the initial claim in October 2025, although the Court of Appeal has granted permission to appeal. The outcome of this judicial review could have significant implications for the company's future operations and valuation, particularly if the reforms are upheld and further limit the company's revenue-generating potential.

Looking ahead, the next expected catalyst for Ground Rents Income Fund is the publication of its unaudited half-year results, anticipated in June 2026. This report will likely provide further insights into the impact of the recent valuation on the company's net asset value (NAV) and overall strategy. Investors will be closely watching for any updates on the judicial review and the potential implications of the leasehold reform legislation, as these factors will be critical in determining the company's future trajectory.

In conclusion, the announcement of an unaudited portfolio valuation of £29.5 million represents a significant decline for Ground Rents Income Fund, reflecting broader market uncertainties and legislative risks. While the company has made strides in reducing its debt, the overall financial picture remains precarious, with potential dilution risks and a challenging operating environment ahead. This announcement can be classified as significant, as it highlights critical issues that could materially impact the company's valuation and operational strategy. Investors should approach this situation with caution, given the substantial risks posed by the proposed leasehold reforms and the uncertain judicial landscape.

Key insights

• ●Valuation dropped 42.3% due to leasehold reform uncertainty.
• ●Debt reduced to £3.9M, but cash reserves raise funding concerns.
• ●Judicial review outcome could significantly impact future operations.

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