Brooks Macdonald sets £150m ground rent target

The newly launched publicly listed Ground Rents Income Fund created by Manchester-based Brooks Macdonald aims to raise a further £100m in the next two years.

The fund raised an initial £50m in August to acquire large ground rent portfolios, mainly but not exclusively residential blocks. The fund, a real estate investment trust listed on the Channel Islands Stock Exchange and SETSqx platform of the London Stock Exchange, began by buying a £20m ground rent fund in Guernsey from Brooks Macdonald.

James Agar, investment director of Brooks Macdonald in the firm's Marsden Street office, told Place there was £30m of deals preparing to complete in the next six to nine months. These will be large portfolios or single buildings. Due to the amount of development activity in recent years followed by the recession, there are currently a lot of ground rent funds in administration or in bank control.

However, prices are rising as competition for ground rents increases. Agar added: "Previously ground rents were very niche but now people are focused more on income-related investment and they are becoming more attractive to institutions."

The fact ground rents can be index-linked gives them bond or gilt-like resilience and they have the added benefit of counting as a property investment for institutions that have to rebuild property holdings in their share portfolios after a spell of selling real estate stock.

The GRIF properties will be managed Braemar Estates in Hale, part of Brooks Macdonald. Agar said the headcount at Braemar would rise by up to 20% from its current level of 55 as a result of the growth of the GRIF in the next two years.

The professional advisory team that put together GRIF was also based in Manchester, which has been short of initial public offerings in recent years.

Lindsey Bayley, director of property tax at KPMG Manchester, said: "Following significant pressure from the property industry and its representatives, the REIT rules changed with effect from 17 July to make the regime much more attractive for the regional property market.

"James and the team at Brooks Macdonald have been the first off the mark, both locally and nationally, in capitalising on these changes, which is hopefully a clear demonstration that the new rules are a lot more practical than they once were. Indeed, once the rule changes were first announced at the end of last year, there has been a lot of renewed interest in REITs amongst our regional client base, and I hope the successful launch of the GRIF provides the confidence for other property groups and funds to progress their own plans."

Philip Goodstone, divisional managing partner at Addleshaw Goddard LLP, said: "We have known James and the Brooks Macdonald team since the Braemar business was established nearly 10 years ago. They came to us for this assignment because they wanted a team with its roots in Manchester and no other firm can rival our combination of corporate and property sector expertise. James and the whole team Brooks Macdonald team did a phenomenal job raising a fund in this very challenging market and we were delighted to be part of this."

Angus Whyte, managing partner of Land Law LLP, said: "We benefit from a close working relationship with James and the management team. The proximity of our offices means we set up meetings with little formality and we can quickly exchange ideas and deal with material issues on these complex purchases.

"On these purchases innovative and commercial thinking is required to concentrate on what is important. It is easy to get distracted by the volume of information involved and efficient set up is fundamental. The technology being used by all associated with GRIF – including KPMG and Addleshaw Goddard LLP – is a huge plus. Most information transfer is electronic via data rooms and cloud-based service so the information is quickly and constantly available on both desktop and tablet devices.

"At a time when the wider property market is distressed James has been prolific in his search for new additions. GRIF has ambitious growth plans and is seeking to take advantage of the economic conditions, with carefully selected purchases of high profile and secure long-term yielding properties."