We are writing to update you on the sale of properties owned by the London and Regional Capitals funds.

We will be providing you with ongoing updates on this process every six months until all properties have been sold and net proceeds returned to investors.

The London fund

As of 11/03/22, we have 67% of properties sold or under offer for a total sales value of c. £2.7m. The remaining three properties in the portfolio are on the market.

The London flat market has faced significant challenges since the wind down process began, but we are still securing competitive prices for the fund's properties. We originally hoped to conclude the wind down process by June but now expect it may be later in the summer. We believe we can secure competitive prices for the remaining properties in the coming months and that it is not currently in investors’ best interests to price these properties aggressively in order to sell them quickly.

With the wind down approaching its end, we have been exploring whether it is possible to make an interim distribution to investors. Unfortunately, the whole distribution would be taxed as income (up to 45% tax loss on the total value of the investment) for those investors who do not hold their investments through ISAs and SIPPs - this means that a distribution is only possible once the fund is formally in liquidation and it is too early for this.

The Regional Capitals fund

As of 11/03/22, we have 32% of properties sold or under offer for a total sales value of c. £6.52m. There are an additional 20 individual units on the market and we are also looking at small portfolio sales, as detailed below.

The latest estimation of fire safety remediation costs is £1.8m, which is in line with our expectations. Remediation works are continuing in a growing number of units across the portfolio, and we have seen promising signs of demand for properties once works have been completed. We have already been contacted by potential buyers interested in eight units we own in Leeds; these units are located in a building where works are due to be completed in April. We have also accepted offers for three properties in another building in Manchester where remediation work has been completed. Although the remediation work required in these three properties was minimal, this is nonetheless an encouraging sign.

The properties continue to be income generating and occupancy rates remain high.

We have also recently made a claim notification to our warranty insurers regarding one unit in Birmingham which has estimated remediation costs of over £200,000. This claim was initially rejected and we’re now considering next steps including potential legal action.

We have recently become aware of certain buyers interested in properties requiring remediation works, in cases where government funding has been secured and work has begun. Although we are exploring this option and have sent a prospective buyer some information regarding a number of our properties, it’s important to emphasise that this process is at an early stage.

Selling these properties would accelerate the completion of the wind down of the fund, as it would reduce the number of properties we needed to complete remediation work on before selling. However, due to the works required, potential buyers may want to purchase these properties at a discount. The level of discount required would have a significant influence on whether we proceed with any potential sale, as the Directors continue to seek to maintain a balance between selling within an efficient timeframe and delivering the best possible value for shareholders.

Due to the large number of properties that still require remediation work, we continue to expect the wind down process to last into 2023. Cash received from sales will first need to be used to pay down debt and fund remediation costs on other units within the portfolio. We expect the treatment of interim distributions to be the same as the London fund (see above), but will continue to explore options.

Dividend Update

As mentioned in our recent dividend update, we have restated the Regional Capital fund’s finance agreement with Barclays and so expect to be paying out dividends as normal going forward. We expect the next dividend will be declared later this month. You will receive an email when this is paid.

We will continue to keep you updated on progress in the coming months.