Q1 2024 Portfolio Update

Below you will find our Q1 2024 performance announcement. This includes; updated financial information on all properties, updated individual unit details, property disposals, development loans, dividends and other important information for investors. 

To ensure that all clients have the opportunity to consider this announcement, the Exchange will be suspended as usual, for 3 working days, re-opening at 10am on Friday 3 May 2024.

Important upcoming dates

1 May5-year anniversary processes: vote commences
3 MayLHX Exchange reopens for trading (10am)
6 MayDividends for the month of April paid. Unit schedule updated to 30 April 2024
15 May5-year anniversary processes: vote ends (11.00am)
31 May May activity update published

Today’s announcements

1. Portfolio performance

2. Dividend distributions

3. LHX Mortgage Bonds

4. May shareholder votes

5. Property development loans

6. Properties with fire safety issues 

7. Upcoming quarterly announcements 

1. Portfolio performance

Today (30 April 2024) we have published updated financial information for every property, including net income, mortgage details and the net cash position. You can find this information at the top of each property’s respective investment page, in the ‘Financials’ section. 

The ‘Individual Unit Details’ section, a tab within the ‘Financials’ section on each property’s investment page that provides detailed information on a unit-by-unit basis, has also been updated to reflect the latest status of every unit and contracted rent for let units. This tab is updated monthly and allows you to track sales progress for all properties voted for sale as part of their 5-year anniversary process. 

All information is updated to 31 March 2024.

Market overview

While inflation has continued to fall – it is now at 3.2%, its lowest level in two and a half years (ONS) – any cut to the base rate is now expected to happen later in the year than previously forecast due to mixed signals in the economy and continued strong performance in some sectors, notably services and manufacturing (UK PMI). 

Some mortgage lenders have therefore increased their fixed term products over the past few weeks, further impacting home purchasers’ affordability and the housing market in general. This is partly why HPI data is indicating a North/South divide, with house prices rising in Scotland, the North-East and North-West, where house prices are on average cheaper, and falling in the South. Overall, a nationwide fall in average house prices in 2024 of between 2 and 4% is predicted (Lloyds and others). This is despite some areas of the housing market seeing significant demand, in particular larger detached properties (Rightmove) where buyers may be somewhat more insulated from mortgage rate movements. The cost of borrowing continues to result in reduced transaction numbers, with data from HMRC showing that the number of UK residential transactions in February 2024 was 6% lower than in February 2023, when the market was already depressed. However, more responsive data sets (e.g. Zoopla) are showing an uptick in transactions in April, in line with the usual seasonal shift in the market. 

Demand in the rental sector continues unabated, driven by both a shortage of rental properties as landlords exit the market and potential buyers staying in rented accommodation for longer due to elevated mortgage rates. These factors continue to push rents higher, with the average UK private rent increasing by 9.2% in the 12 months to March 2024 (provisional estimate) (ONS Price Index of Private Rents (PIPR)), driven partly by significant growth in the London rental market, where rents have increased by 11.2% over the same period. 

Residential portfolio unit status

The table below gives a summary of unit status by category across the residential portfolio at 31 March 2024. The changes exhibited over time continue to highlight the focus on selling residential units, as we seek to repay mortgages and fulfil shareholder mandates to sell properties following their 5-year anniversary votes.  

Residential unit status31 March 2023 30 June 202330 September 202331 December 202331 March 2024
To let (vacant)104765
For sale (vacant)5254794949
Under offer (vacant)4460537781
Total current units442426406384359

Rental performance

We have been proactively carrying out rent reviews across the portfolio, leading to increased rental performance. Across 224 tenanted residential units, contracted rent grew by 8.3% in the 12 months to the end of March 2024. This rental performance was less than in the 12 months to December 2023 (previously 9.2%), partly due to the fact a large number of vacant units in our portfolio pending sale are in London, which has seen the most significant increases in rental performance. If we exclude London, the UK average rent is 7.8% higher over the same 12 month period (ONS). 

Unit sales

There were 25 residential units sales completed in Q1 2024, amounting to £6.5m in property value. Across these completed unit sales, sales prices were on average 2.6% below their vacant possession value (VPV) and 1.5% below their purchase price. 

Of the units sold in this quarter, 65% were London flats, which sold on average 10.2% below purchase price, with the remaining 35% being regional properties which sold for 20.1% above purchase price. London property prices (all types) have fallen by 4.8% in the 12 months to February 2024 (Land Registry), with flats, particularly those without outside space, continuing to suffer from lower demand. 

Unit sales have accelerated significantly this last quarter, with property transaction values £2m up on the last quarter. This may be on account of the more positive longer term outlook for both the housing market and interest rates in 2024/25, with the increasing cost of rent also having a potential impact on people’s decision to purchase. 

However, it remains the case that we are seeing longer than average sales periods and, despite the property team working hard to make more properties vacant for sale, we are having to undertake an increasing number of evictions. This is on account of a number of tenants refusing to leave, we believe due to the significant increases in rent and low supply in the rental market, which is further protracting the sales process.

Clients can see the performance of agreed and completed sales in the Individual Unit Details of each property and on our Selling Record.

Mortgage debt

As it stands, the average interest rate across our mortgaged portfolio stands at 8.0%, which is unaffordable for the majority of residential properties. The cost of servicing mortgage debt erodes rental income and is the primary reason for dividend suspension across the portfolio. 

We are continuing to pay down mortgage debt wherever possible, predominantly through unit sales, and £2.7 million of mortgage finance was repaid during the last quarter. The total portfolio mortgage loan-to-value (LTV) reduced to 43.7% at 31 March 2024, from 46.7% at 31 December 2023.

2. Dividend distributions

The following properties will have their dividend reduced from 1 May 2024.

PropertyAsset typeCurrent dividend yieldNew dividend yield
1. Duffield Road, DerbyResidential4.08%2.50%
2. Bath and Oxford PortfolioResidential4.77%4.00%
3. Ramsey Place, AberdeenPBSA5.17%4.00%

The average net dividend yield on the 6 properties distributing dividends is 3.47%.

3. LHX Mortgage Bonds

Three Mortgage Bonds were successfully completed in March and one was successfully completed in April, with over £1m raised.

Following recent unit sales in Mortgage Bond properties during Q1 2024, there has been the full repayment of capital and interest in two bonds: 

  • The 15 & 25 Anchor Point Mortgage Bond has been repaid in full with interest. Bondholders achieved an interest rate of 9.25% p.a., accounting for increases in the Base Rate over the bond’s term.
  • The Garden Court Mortgage Bond has been repaid in full with interest. Bondholders achieved an average interest rate of 8.78% p.a, accounting for increases in the Base Rate over the bond’s term.

The Mortgage Bonds and their rates are presented below, but please note the next Bank of England base rate decision is coming up on 9 May and any change to the base rate will be immediately passed directly on to bondholders, changing the per annum interest rate for each of our Mortgage Bonds:

PropertyCurrent p.a. return 
Hammonds Landing, Sowerby Bridge 8.25%
Queen Street, Sheffield8.00%
Spencer Parade, Northampton8.20%
Devonshire Place, Brighton8.35%
Dutch Quarter II, Colchester*9.25%
Keogh House, Swindon8.25%
Flats 7 & 9 Anchor Point, Surrey Quays9.25%
Flats 15 & 25 Anchor Point, Surrey Quays*Fully repaid, with interest
Garden Court, West DraytonFully repaid, with interest
Jubilee Mansions, Barons CourtFully repaid, with interest

* Indicates partial repayment of capital with interest following unit sales. 

View Mortgage Bonds page

4. May shareholder votes

a. 5-year anniversary

One property is undergoing its 5-year anniversary process in May, with voting commencing on Wednesday, 1 May. 

Osborne Mansions, Brighton

Please note this will be the first time we run the new annual anniversary process – a simple shareholder vote on whether or not to sell the property (hold vs sell), with the outcome determined by a majority of shareholders. Further information on the new process can be found here. 

b. Unit sale votes

Shareholder votes will commence Wednesday 1 May for the potential sales of units in the following properties:

Your Dashboard, sets out those properties in which you are a shareholder with ongoing votes. 

5. Property development loans

You can find the latest updates on the outstanding loans on their respective investment pages here.

6. Properties with fire safety issues 

The UK-wide fire safety scandal continues. We are working to help resolve outstanding issues where possible and the government is continuing to address the issues across the UK, but the situation remains far from resolved across our 7 impacted properties. Our power to progress the situation is limited in our capacity as a leasehold owner of a small number of flats within a larger block. However, where a fire-safety issue has recently emerged at Terence House, Newcastle upon Tyne, as the freeholder we are able to proceed to undertake the necessary works. 

For further details on this and 7 properties that are impacted, read the latest update on each affected property’s Latest Update section.

7. Upcoming quarterly announcements

30 April 2024 – market closed from 10 am that day until 10am, 3 May 2024

31 July 2024 – market closed from 10 am that day until 10am, 5 August 2024

If you have questions about these announcements, please email us at support@londonhouseexchange.com

Best wishes, 

The LHX team