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.
London fund
Of the nine properties in the fund (total sales value of c. £3.8m), six are now sold, with the remainder under offer and in diligence.
We still need to complete the process of selling the remaining assets, which typically takes a few months. Once these assets have been sold, a liquidator will be appointed to distribute net proceeds to shareholders as soon as practicable. We will notify investors ahead of this appointment and are targeting the end of the year for the distribution of net proceeds, but this will be dependent on how quickly the final asset can be sold.
Regional Capitals fund
Sales Progress
As of 29/08/22, we have 42% of properties sold or under offer for a total sales value of c. £8.6m. There are an additional 12 individual units on the market and we are also looking at small portfolio sales.
Due to the large number of properties that still require fire safety remediation work, we continue to expect the wind down process to last into the second half of 2023. Cash received from sales will need to be used to pay down debt and fund remediation costs on other units within the portfolio.
Remediation works are continuing in a growing number of units across the portfolio (of the 43 units that are currently not able to be marketed due to cladding works, over two-thirds are in buildings with works underway). However, there remains a number of buildings where work is yet to begin as government funding has not been approved.
When work is completed, we move swiftly to sell our properties. One development where we own eight flats had its remediation work completed in April and we already have four flats under offer. We will continue to steadily filter the remaining units onto the market to avoid a glut of similar assets which would decrease prices.
Despite the newspaper headlines in relation to a potential property market slow-down, the sales progress of our flats has continued. Since the second half of June, we have accepted offers on 14 units totalling £2.1m.
The properties in the portfolio not yet sold continue to be income-generating and occupancy rates remain high. The rental market is currently very active, with high levels of demand which are driving increased rents.
Fire Safety Remediation Funding for Regional Portfolio
The latest estimation of total fire safety remediation costs is £1.8m, which is in line with our prior expectations.
Last month the Government announced that they had removed the subsidy control cap that limited the amount of funding landlords could receive to pay for fire safety remediation work. We have been calling for this change for 18 months and, while glad the Government has finally reversed its position, it is deeply frustrating to know that removing the cap at the beginning of this crisis could have prevented the closure of both Bricklane funds.
Additionally, the cap is only removed for funding applications that had not received full approval before 28/07/2022. This is particularly frustrating because the fund will not receive a rebate on costs for buildings where building managers made their applications quickly. These buildings also tended to be where the most significant work is required.
We are currently reviewing each affected building and contacting building managers to understand the stage of each application to establish where we will be able to benefit from the government U-turn.
Where we are not able to receive government funding, we are reviewing whether we can make a claim against the original property developers. The Building Safety Act 2022 has now come into force, which has resulted in some new protections for leaseholders, including:
An increase in the limitation period for claims for building defects from 6 to 30 years; and
Allowing leaseholders to make claims against companies ‘associated’ with the original developer. This prevents developers from using a corporate structure to avoid their obligations to pay for remediation work.
We remain committed to ensuring the best interests of shareholders are taken care of, and that the situation is closed out as soon as practicable, without jeopardising those interests.
Dividend update
We expect that the next dividend will be declared next month. You will receive an email when this is paid.
We will continue to keep you updated on progress in the coming months.