January 2023 Portfolio Update | London House Exchange

Below you will find our Q4 2022 performance announcement. This includes updated financial information on all properties, property disposals, dividends and other important information for investors. 

To ensure that all clients have the opportunity to consider this announcement, the LHX Exchange will be suspended as usual, for 3 working days, re-opening at 10am on Friday 3 February 2023.

Since our rebrand to London House Exchange and announcement of Better’s significant direct investment in the Exchange, we have seen a marked improvement in trading volumes and pricing.

Through the LHX All-Share Investment Plan, clients are able to invest alongside Better: maximum diversification, best execution and best pricing available on the market. With the Exchange currently trading on average at a 25% discount to independent valuation, significant client capital has already been committed to the first month’s Investment Plan.

Important upcoming dates 

Today’s announcements

1. Portfolio performance

2. Dividend distributions

3. Equity Fundraises and other measures

4. Leasehold changes update

5. 5-year anniversary disposals

6. Disposals of individual units within blocks

7. Property development loans

8. Properties with fire safety issues 

9. Upcoming quarterly announcements

1. Portfolio performance

Today we have updated every property’s performance, as we do each quarter, including net income, mortgage details and net cash position. You can find this toward the bottom of every property’s respective investment page, in the ‘Financials’ section.

In the 12 months to December 2022, the residential portfolio has delivered 6.0% rental growth across 346 units (this does not include units that we have vacated for sale). This performance is over 40% above the UK average of 4.2% (ONS Index of Private Housing Rental Prices). To put our portfolio’s performance into context, this increase of 4.2% represents the largest annual percentage change since this data began being collected in 2016. 

As discussed in detail in previous quarters, strong rental performance is being offset by large increases in the cost of borrowing. The average mortgage rate has increased by over 100% in the 12 months to December 2022, from 3.1% to 6.3%. A further increase is expected on 2 February from the Bank of England. 

To mitigate the impact of mortgage interest, we have a significant programme of property disposals across the portfolio. Since December 2021, the average loan-to-value (LTV) ratio has reduced from 52% to 46% today.

2. Dividend distributions

From 6 February, we will be distributing dividends for 15 properties at an average yield of 4.3%. A full list of these properties is available here.

We will continue to drive net rental yields up and mortgage LTVs down, but in the short term, a majority of properties will continue to face mortgage interest headwinds that will preclude dividend distributions.

3. Equity Fundraises and other measures

The following properties successfully raised fresh equity in Nov-Dec 2022 and strengthened their financial positions. New shares were issued, and mortgages and deficits (where applicable) were reduced.

As we outlined during the Equity Fundraise process, properties that failed to successfully raise equity will require further measures. In the first instance, the following properties will commence a shareholder vote tomorrow to allow shareholders in each property to determine how best to raise new capital to strengthen their financial position:

4. Leasehold changes update

From 30 June 2022, the Leasehold Reform Act came into force whereby ground rent charges are banned in new leases. As a result, mortgage lenders are increasingly reluctant to lend on existing leases with ground rent levels over certain levels. Furthermore, buyers’ solicitors are increasingly going beyond the Act and what mortgage lenders require, to insist on removing ground rent charges completely. 

This has already created significant disruption to an increasing number of sales of our units and will continue to in the future. We are therefore providing the relevant details for every leasehold property in the portfolio, which can be found in the ‘Property Detail’ section of each leasehold property.

5. 5-year anniversary disposals

For those properties that have previously been voted by shareholders for sale, you can view their current status on their property pages and monitor overall sales progress on our Selling Record.

A summary of 5-year anniversary sales:

• 37 unit sales completed
• 33 units under offer
• 178 units to be sold as soon as possible, subject to vacant possession and ensuring we do not harm the market by selling too many units in the same block at once

6. Disposals of individual units within blocks

These are discretionary sales of individual units within a block, where shareholders in each property have voted for the unit sale. Reasons for these sales include: opportunistic sales to capture favourable market conditions, reduction in expensive mortgages, reduction of net cash deficits, reduction of mortgage refinance risk, etc.

Again, clients can see the performance of these sales on our Selling Record.

A summary of these disposals:

7. Property development loans

We have successfully repaid another development loan this quarter. Boatman’s House, Isle of Dogs was repaid in full, achieving a total return of 28.4% (after all fees), equivalent to an interest rate of 10.0% p.a. 

Of the 16 development loans that our clients have funded, 11 have been repaid in full with interest, returning £6.4m with an average return of 10.1% p.a. 

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

8. Properties with fire safety issues 

The UK-wide fire safety scandal affecting high rise blocks continues. Where we are the freeholder we have acted swiftly, as has been the case with Tower Mint Apartments where works were completed at the end of 2022 and the property is now free of fire safety issues.

The government is continuing to address the issues across the UK, but the situation remains far from resolved. 

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

9. Upcoming quarterly announcements

28 April 2023 – market closed from 10 am that day until 10am, 3 May 2023

31 July 2023 – market closed from 10 am that day until 10am, 3 Aug 2023

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

Best wishes, 

The LHX team

Capital at risk. The value of your investment can go down as well as up. The Financial Services Compensation Scheme (FSCS) protects the cash held in your London House Exchange account, however, the investments that you make through London House Exchange are not protected by the FSCS. In the unlikely event that London House Exchange ran into difficulty, PricewaterhouseCoopers LLP has been pre-engaged to manage the sale of the property portfolio – read more about our Investment Safeguards here. The performance information (including any expression of opinion or forecast) reflects the most up-to-date data at the time of production; publication is made in good faith on the basis of publicly available information or sources believed to be reliable. Past performance and / or forecasts (if stated) are not a reliable indicator of future performance. Interest and capital returned may be lower than expected. Gross rent, dividends, and capital growth may be lower than estimated. Exiting your investments (on the Exchange, via the 5-year anniversary process or according to targeted strategies) is subject to price and demand. London House Exchange does not provide tax or investment advice and customers are advised to obtain appropriate tax or investment advice where necessary. Financial promotion by London House Exchange Limited (No. 8820870); authorised and regulated by the Financial Conduct Authority (No. 613499). See Key Risks for further information.