One of the few bright spots in the booze business in recent years has been the continuing success of English wine and, in particular, English fizzy wine (aka “English Champagne“). The likes of Chapel Down and Nyetimber have made their mark, albeit at no small cost to the drinking classes. But what is less commented on is the real estate premium that has attached to small English estates with vineyards. A smallholding with arable on the South Downs would be capable of being marked to market against many other similar yielding farms but a bespoke, vineyard in the same area has a “uniqueness “that carried some cachet and resulted in a capital enhancement for the landowner. One small South England wine grower known to The GC has paid his children’s school fees by selling off bits of the vineyard to wealthy types that fancy a, er, “diversification” of their real estate portfolio. After all they say, at least we can drink the dividend …. But now it looks like that trade might be off. Following huge removals of active vineyard from the supply chain in France we hear that some of the English wine growers are looking to sell up. Our friends in the wine trade bemoan the falling consumption amongst The GC generations and maybe this is making these niche wine growing projects less and less economic in turn feeding back to the value of the land they occupy.
Leasehold reform …. now there is one of the great, ongoing epics. With almost its last breath in July 2024 the Conservative Government pushed through a version of the Leasehold Reform Act it had been promising since 2017. Problem was it had two major holes in it. There was no all-important deferment rate (the % at which future ground rent income streams are discounted to give a current capital value) and the issue of capping or eliminating future ground rents was also left open. The chattering professionals, whose lives are spent in this valuation area, have been expressing their views on Linkedin and other platforms. What GC finds amazing is the degree of wishful thinking amongst the freeholders and those that advise them. If you read Labour’s proposed amendments to the July 2024 Act and the accompanying comments to the King’s Speech, it is pretty clear that the deferment rate will be set at a level that is higher than the current Sportelli rate of 5% for house ad 5.5% for flats. Labour is on the record as stating that when setting the deferment rate the “overriding priority” should be that lease extensions should be made cheaper and easier than before (in other words the deferment rate needs to be higher than Sportelli). Those hoping that the Conservative Government’s guideline that it should be the “market rate “that determines the deferment rate and that this will somehow rescue freeholders and compensate for the abolition of marriage value should think again. Research submitted to the new Government shows that the national average deferment rate paid by investors for future rent income streams at auction was, wait for it …. over 9%. That is one, very nasty market rate that the Government could introduce as the new deferment rate. There is the threat of litigation and challenges by freeholders to the new legislation but, from what The GC has seen and read, the ECHR is highly unlikely to turn over the will of parliament, where due process was followed, and the law was based on manifesto commitments. So, although it makes total economic sense for the lawyers, that want to act for freeholders, to talk up the prospects of a legal human rights challenge this looks like a very clear case of throwing good money after bad. Freeholders need to understand the direction of travel here and adjust quickly.
Right across our great industry the “S” in ESG is rightly getting more and more attention. Many firms are acting to help those from disadvantaged areas. The work of, for example, The Academy of Real Assets is bringing together all parts of the Real estate and assets’ worlds and having a real impact nationally. But one aspect of the way some firms do “S” needs to change. Many developers and owner/investors, including some of the great London estates, exclusively target their “S” efforts and money into those areas where they have a commercial interest. This has to change. Of course, operators want to help those communities where they operate but if everyone only worked in those communities where they were invested then great swathes of the country will be left out. Opinion formers, Professional bodies, leading voices need to encourage everyone to not only invest their “S” time and resource into the areas they are in but nationally through entities that are working to have an impact right across the UK in all communities.
