Investors may like ground rents but are the creators of these investments – the house builders – fully exploiting this source of revenue?
Landmark Investments Group, a specialist investor, believes residential developers are missing out on a potential £300m profit a year. This is based on the industry’s £19bn turnover, a £200,000 average sale price and average annual ground rents of £250.
Bolton-based Landmark acts for many leading house builders and has spent the past decade buying, selling and managing ground rents. The group plans to spend £30m on stock in 2010.
Director Mark Hawthorn claims that many developers do not consider the value of selling or collecting ground rents from their properties, which is “almost all profit”.
Hawthorn says, “Considering the market conditions over the last couple of years, ground rent sales could be a welcome and significant addition to profits, especially for house builders with large-scale apartment developments.”
Joint developers Countryside Properties and Taylor Wimpey were the beneficiaries last year when they sold 1,095 ground rents in their Greenwich Millennium Village in south-east London. The ground rents produce £200,195 in Annual income and the sale reflect a yield of 6.5%. The house builders pocketed £3.1m.