Ground Rents Income Fund PLC Beetham Tower Litigation Update (8260C)
October 21 2020 - 10:15AM
UK Regulatory
TIDMGRIO
RNS Number : 8260C
Ground Rents Income Fund PLC
21 October 2020
21 October 2020
THIS ANNOUNCEMENT CONTAINS INSIDE INFORMATION
Ground Rents Income Fund plc
("GRIO" or the "Company")
Beetham Tower Litigation Update
Ground Rents Income Fund plc ("GRIO") provides an update
regarding the ongoing litigation at Beetham Tower, Manchester, a
mixed use residential and hotel asset owned by its subsidiary,
North West Ground Rents Limited ("NWGR").
As outlined in the Company's interim results, the litigation at
Beetham Tower relates to a cladding defect from the original
construction of the building. The issue was identified in 2014
following which the original contractor, Carillion Construction
Limited ("Carillion"), carried out temporary remedial works whilst
exploring a longer-term repair solution. Carillion entered into
compulsory liquidation in January 2018.
In March 2018 the hotel leaseholder operating within the Beetham
Tower, Blue Manchester Limited ("BML"), issued proceedings against
NWGR regarding the cladding repair and a related damages claim for
loss of profits. In July 2018, NWGR commenced proceedings against
parties including Carillion (in liquidation), its insurers, façade
sub-contractors Bug-Alutechnik GmbH and architects SimpsonHaugh,
which it believes have a responsibility to remedy the defects in
the cladding.
On 31 January 2019, a High Court judgment concluded that the
building was in disrepair and issued an order for NWGR to carry out
specific, permanent remedial works by 31 July 2020.
Following a tender process of contractors, the potential total
cost to complete the specific, permanent remedial works is
estimated to be approximately GBP8.9 million. NWGR has been
pursuing the abovementioned parties to defray some or all of these
costs, as under the lease terms it is responsible for 49% prior to
any recovery from the abovementioned third parties.
Following Schroders' appointment as Alternative Investment Fund
Manager ("Manager") in May 2019, NWGR, the Manager and specialist
advisors have prepared to implement the Court-ordered scheme,
whilst also exploring an alternative repair solution.
Following extensive engagement with Manchester City Council and
with the support of the Beetham Tower Residents Association
("BTRA"), in May 2020 planning permission was secured for an
alternative repair scheme which NWGR believes is more deliverable
than that required by the High Court judgment, at a total cost of
approximately GBP4.1 million. In June 2020, NWGR made an
application to the High Court to approve the alternative scheme.
This was challenged by BML.
On 20 October 2020, the High Court found against NWGR's
application to vary the remedial work to the alternative repair
scheme, but extended the time to complete the scheme originally
ordered until 31 July 2022. NWGR is exploring whether it can still
reach a settlement with the abovementioned parties, whilst also
contingency planning for the scenario where this is not achievable.
This includes contingency planning for a formal insolvency process
in respect of NWGR.
Since the 2019 High Court judgement, at NWGR's request GRIO has
provided loans to NWGR totalling approximately GBP2.1 million to
facilitate NWGR's working capital requirements, including its
exploration of the alternative repair solution.
NWGR has no external debt, other than the shareholder loans
previously advanced by GRIO. GRIO has not provided any parent
company guarantees in respect of NWGR's obligations. Based on
expenses incurred since the 31 March 2020, and a provision for
costs, the further negative financial impact for the GRIO group, if
additional funding were to cease and were NWGR to enter into
administration or liquidation, is expected to be approximately
GBP1.3 million.
The Company acquired NWGR in August 2012 subject to 219
residential leases that currently generate ground rent income of
GBP33,250 per annum as well as a single lease of the hotel, now
owned by BML, on a 999-year term that currently generates ground
rent income of GBP30,902 per annum. Beetham Tower is the sole asset
owned by NWGR and as at 31 March 2020 it had a value of GBPnil.
-END-
For further information:
Schroder Real Estate Investment
Management
Matthew Riley 020 7658 6000
N+1 Singer (Broker)
James Maxwell / Ben Farrow 020 7496 3000
Appleby Securities (Channel Islands)
Limited (Sponsor)
Andrew Weaver 01534 888 777
FTI Consulting
Dido Laurimore / Richard Gotla /
Meth Tanyanyiwa 020 3727 1000
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