Member Article

Grainger sells German business for £94m to focus on UK PRS

Property firm Grainger plc has announced the sale of its largest German business asset for £94m, a move which edges the Newcastle-based firm closer to exiting the German property market as it looks to simplify its operations.

The disposal, to global real estate investment manager Heitman, comes just four days after Grainger acquired a £98.7m private rental sector (PRS) development in Manchester, as heralded at the end of last month when the firm revealed its new £850m investment strategy focussing on the UK PRS.

This transaction follows the sale of Grainger’s German JV with Heitman at the end of last year, which generated a pre-tax profit of around £11m. As Grainger’s largest wholly owned German portfolio, it represents a meaningful step forward in exiting the German operations and delivering on the stated objective of simplifying the business.

The portfolio will be acquired by Heitman’s newly launched close-ended fund, Heitman European Residential Investment Partners, for c.€55m (c.£42m) of cash, with the buyer assuming debt of c.€69m (c.£52m).

Moreover, Grainger Deutschland GmbH will be acquired by Heitman for a nominal sum, which will mitigate against potential risks and costs for Grainger as it delivers on its strategy of exiting its German operations.

As at 30 September 2015, the portfolio comprised of circa 1,595 mainly residential properties in 110 assets located in Western Germany, mostly in the Rhine-Main region, and was valued at c.€125m (c.£92m).

Completion is expected by 29 February 2016, subject only to approval by German Federal Cartel Office. This transaction, along with the sale of Grainger’s Equity Release division, will reduce Grainger’s overheads by c.10% post-completion.

Helen Gordon, CEO of Grainger, said: “Following the successful sale of our previous JV with Heitman at the end of the year, today’s sale takes us one step closer to our stated aim of exiting our German business in order to focus on the UK private rented sector (“PRS”).

“We are pleased that Heitman has identified our platform and these assets as an attractive starting point for its new European residential fund. The sales process for our remaining German assets is underway and we look forward to updating the market in due course.”

Analysis

Editor Jamie Hardesty said: “Clearly, this announcement shows Grainger’s commitment to growing its operations back home, in the UK private rented sector.

“Since outlining an £850m investment strategy only last month, new CEO Helen Gordon has acted swiftly, showing Grainger’s determination to deliver on this UK focus.

“With the sale of Grainger’s remaining German assets, 1,137 residential units, now underway, it is now only a matter of time for the Newcastle firm to deliver its exit target.

“The company’s recent activity has captivated the interest of many in the region, who are watching a major North East company shift and redefine its strategic outlook. It will be exciting to see how it’s UK PRS vision unfolds later this year and beyond.”

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