Member Article

Newcastle’s Grainger sells Equity Release Division at £55m profit

Grainger plc, the UK’s largest listed residential property owner and manager, has announced the sale of its Retirement Solutions business making an estimated £55m profit.

The Newcastle-based company has exchanged contracts with Turbo Group Holdings Limited (Turbo), an entity owned by Patron Capital Partners and Electra Private Equity plc, to sell its Equity Release Division.

Completion is anticipated on or before 30 May 2016, subject to Turbo gaining regulatory approval from the Financial Conduct Authority (FCA).

Following the announced sale of Grainger’s interest in its German Joint Venture with Heitman in November, and the planned disposal of the Group’s wholly owned German assets, this transaction represents a further significant milestone in re-focusing and simplifying Grainger’s business, strengthening the balance sheet and reducing financing costs.

The deal estimated at £325m comprises of c.£175m in cash proceeds and the transfer to the buyer of c.£150m of debt. Grainger’s net debt is estimated to decrease by £325m in turn.

Grainger intends to apply the net proceeds of the disposal to reduce debt and reinvest toward the growth of its Private Rented Sector business.

For the year to 30 September 2015, the Retirement Solutions division delivered gross sales proceeds of £35.9m, recurring profit of £6.1m and a loss before tax of £5.4m after non-recurring items.

As at 30 September 2015, the division comprised a portfolio of 3,671 residential properties predominantly subject to home reversion plans (a type of equity release product), with a market value of £327m. The sale of the division includes Grainger Equity Release Limited, Grainger Equity Release Management and Bridgewater, the home reversion brand.

Helen Gordon, Grainger’s CEO, said: “This is an important transaction for Grainger. It accelerates the transition to a business focused on the residential rented sector and will simplify the Group.

“It will materially reduce our financial and operational costs, including costs associated with running a FCA regulated business, and will significantly strengthen our balance sheet and capacity for investment.”

Keith Breslauer, Managing Director of Patron Capital Partners, said: “We are pleased to be joining forces with Electra Partners on this deal, which provides us with a strong business that has an extensive portfolio, attractive exposure to the UK residential property market and exceptional growth potential, particularly given the ageing population.”

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