GCP Student Living fee cut
Gravis Capital Management has agreed to a reduction on the amount it charges GCP Student Living – from 1% of NAV to 0.75% on the first £950m of assets, plus 0.6375% on amounts between £950m and £1.5bn and 0.5625% on amounts over £1.5bn.
That is quite a big drop in its fee, but in return GCP Student Living will now cover the annual property management fees which Gravis had been paying from its own pocket. These are 0.25% of the value of operational assets in the NAV. the effect to Gravis was that it was earning net a fee of about 0.82% on NAV before this change – so it is still taking a fee cut, just not as big a one as the headline figures might suggest.
The notice period has been changed to two years (was one year but notice couldn’t expire before 21 September 2021).
Property management arrangements
Going forward, Scape will be entitled to an annual property management fee (payable quarterly in arrears) in respect of the management of purpose built student accommodation of 4% of the total income and 1.25% of net operating income attributable to the Group’s purpose built student accommodation managed by Scape. An annual property management fee (payable quarterly in arrears) of 2% of income shall be payable in respect of the management of the Group’s non-purpose built student accommodation commercial space. The fee is cut by 20% in situations where occupancy is materially and adversely affected by a pandemic and/or epidemic, including in the current Covid-19 pandemic.
Scape is taking on some employment cost overheads current borne by the fund and this arrangement is expected to save about £800k a year based on the year to 30 June 2020.
All-in “were these arrangements to have been entered into on 1 July 2019, the Group would have benefitted from approximately £0.6 million of cost savings for the 12 month period ended 30 June 2020. This represents a reduction to the Group’s aggregate investment and property management costs for the period of approximately 7% on a like-for-like basis.”