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Residential property landlord Grainger (GRI) reported a 3.2% increase in NAV per share to 223p for the year ended September 30th. However, the group posted a loss before tax of 1.7 million pounds for the period due to derivative movements of 31.2 million pounds, a swing from a 26.1 million profit last year. This loss was achieved despite a 45% increase in Gross Fee income to 10 million pounds. Grainger increased its dividend by 4.9% to 1.92p per share. Grainger finished down by 1.5p at 113.5p.
N+1 Singer kept to its "buy" recommendation on landlord Grainger (GRI) with a target price of 145p. The broker is impressed with the way the company has recently reduced its net debt despite challenging market conditions, especially for its German operations. The broker also notes the firm's strategy to improve fee income, which should lead to improved returns on capital.
Grainger, the UK's largest listed residential owner and manager, said it had signed up for a joint venture, to which it will hand around half of its German assets. The company has done a deal with global real estate investment firm Heitman, creating a company that will invest in around 3,000 unit German rented residential portfolio currently wholly owned by Grainger. The joint venture will be 75:25 owned by Heitman and Grainger respectively and has a long-term strategy aimed at maximising returns through income growth and active asset management. "The transaction will allow Grainger to leverage its management platform, acting as the JV's expert partner in German residential property investment," the firm said. "Grainger will receive fee income for its services to the joint venture and also retain a strategic stake in the portfolio." The portfolio of German residential assets represents €232m of Grainger's total €474m German portfolio as at 31st March. It comprises 2,985 residential units across six regions in Germany and produces an approximate annualised profit of €5.2m, including revaluation gains, Grainger said. The firm added that the deal would give rise to a one-off post tax charge currently estimated at £5.2m (€6.5m) including costs. This will be taken into account in the income statement for the year ended 30th September 2012 as a non-recurring item.
Commenting on the new joint venture, Rob Reiskin, co-head of Europe at Heitman, said: "We are very happy to partner with best-in-class operator Grainger in the German rented residential market where we view the fundamentals as particularly attractive. Moreover, with most of the assets located in high barrier to entry premier markets, Bavaria and Baden Württemberg, the JV provides a rare opportunity for institutional investment where it has formerly been difficult to gain exposure." Andrew Cunningham, chief executive of Grainger plc, said: "This new partnership with Heitman and its institutional client represents a strong endorsement of Grainger's operational platform and the prospects for the German residential investment market. This deal supports our on-going programme of generating greater fee income from third parties, balancing our trading income with other recurring income - a key aim for the Company, and our process of deleveraging. "Grainger has established a strong track record of creating co-investment vehicles and we are extremely pleased to be partnering with such major international institutional investors in Germany. There is a strong interest among many other global real estate investors in the residential market at the moment which allows us to align our interests closely and provide our operational platform and expert management services to those investors wishing to access the residential market in the UK as well as Germany."
CONT The JV will acquire a portfolio of German residential assets currently wholly owned by Grainger, representing €232m of Grainger's total €474m German portfolio as at 31 March 2012. The portfolio comprises 2,985 residential units across six regions in Germany and produces an approximate annualised profit of €5.2m, including revaluation gains. The transaction will give rise to a one-off post tax charge currently estimated at £5.2m (€6.5m) including costs. This will be taken into account in the income statement for the year ended 30 September 2012 as a non-recurring item. This equates to a reduction in Grainger's NNNAV of c.1.3 pence. Grainger has arranged €152m of debt which will also be transferred to the JV, resulting in a JV LTV of 65%. The consideration payable to Grainger for the 75% stake is €54m, subject to a normal completion balance sheet process. Consequently, Grainger's debt will reduce by c.€206m. Grainger will provide management services to the new JV for which it will receive standard management and incentive fees. Grainger continues to directly own a further 3,400 assets in Germany. German residential property investment is an attractive sector offering strong income generation characteristics, with limited new supply coming into the market, and offers the potential for significant rental and value growth in the medium to long term.
HEITMAN PARTNERS WITH GRAINGER PLC IN GERMAN RESIDENTIAL INVESTMENT Grainger plc and global real estate investment firm Heitman today announce that they have signed an agreement to create a joint venture (JV), "MH Grainger JV Sarl", to invest in a c.3,000 unit German rented residential portfolio currently wholly owned by Grainger. The JV will be 75:25 owned by Heitman, on behalf of a global institutional investor, and Grainger, respectively. The JV's long-term strategy is aimed at maximising returns through income growth and active asset management. The completion of the deal is subject to a set of Conditions Precedent and is expected to complete soon. Today's agreement is in line with Grainger's previously stated strategy to align itself with third party institutional capital to make more efficient use of its balance sheet and operational platform. The transaction will allow Grainger to leverage its management platform, acting as the JV's expert partner in German residential property investment. Grainger will receive fee income for its services to the JV and also retain a strategic stake in the portfolio. For Heitman the JV represents a further step in its growth in Europe and the continuation of the firm's successful global strategy of identifying promising trends ahead of the overall market and aligning itself with strong local property firms in order to deliver results for its investors.
"When we first met Bloor Homes they stood out as an organisation which clearly understood the scheme and was very understanding of the long term nature of the Berewood development and how Grainger wants to create a fantastic place to live," said John Beresford, the Development Director at Grainger. "When they were shortlisted I visited a few of their current schemes and was impressed with the high quality of the developments. I am very excited to see the first homes be created at this wonderful new community."
Residential property owner-manager Grainger has announced that it has sold the first phase of its Berewood housing scheme, located west of Waterlooville in South Hampshire, to Bloor Homes which will begin construction next month. Bloor Homes has bought an 11.2 acre site with planning consent for 194 new homes and an end gross development value of around £35m. Grainger has obtained planning permission for 2,550 new family homes within the Plant Farm Zone of Berewood, together with supporting social infrastructure, which includes a local community centre, land designated for healthcare and elderly care facilities, as well as two primary schools and a nursery. The firm said on Friday morning that the sale is "in line with Grainger's strategy for Berewood, the major housing development in Hampshire, which is to sell phases of consented land to housebuilders after first installing infrastructure, such as roads and utilities." This sale represents the first of thirteen phases at Berewood, which in total comprises 168 developable acres.
John Beresford, Development Director at Grainger plc, said: "When we first met Bloor Homes they stood out as an organisation which clearly understood the scheme and was very understanding of the long term nature of the Berewood development and how Grainger wants to create a fantastic place to live. When they were shortlisted I visited a few of their current schemes and was impressed with the high quality of the developments. I am very excited to see the first homes be created at this wonderful new community." Adrian Bloor, Southern Regional Chairman at Bloor Homes, said: "Bloor Homes are delighted to have been selected by Grainger Plc to deliver the first phase of this exciting Berewood neighbourhood development. What particularly attracted our company to the project was the high quality of design and the attention to detail in the implementation of the infrastructure. Combined, these two qualities will create a premium environment which complements the Bloor Homes brand."
The scheme, built and designed for long term success, comes at the same time that Grainger celebrates its 100th year birthday and as Grainger applies to set up its own affordable housing provider ("Registered Provider") in order to own and manage the affordable housing at Berewood for the long term. Throughout the competitive tender process, Bloor Homes demonstrated that it would be an excellent development partner for Grainger because it fully understands the long term vision Grainger has for Berewood. Furthermore, it has also successfully delivered other schemes designed by Robert Adam. Grainger is looking forward to working with Bloor Homes over the next two years to implement what is a very important stage of the Berewood development. The scheme received outline planning consent late in 2011 along with detailed planning consent for this first phase.
- Grainger plc has sold the first phase of its Berewood scheme in Hampshire to Bloor Homes, a site with planning consent for 194 new homes - Grainger today announces that it has sold the first phase of its Berewood housing scheme to Bloor Homes, an 11.2 acre site with planning consent for 194 new homes (of which 77 are affordable). Bloor Homes will begin construction in November, with the first homes expected to be completed in Spring 2013. The end gross development value ("GDV") for Bloor Homes is anticipated to be in the region of £35m. The sale is in line with Grainger's strategy for Berewood, the major housing development in Hampshire, which is to sell phases of consented land to housebuilders after first installing infrastructure, such as roads and utilities. This is the first phase of thirteen at the Berewood development, which in total comprises 168 developable acres. Grainger's Berewood scheme, located in Waterlooville, Hampshire, will see 2,550 new homes, two new schools, offices, retail, and two new pubs built over a 10 to 15 year period. The scheme, masterplanned by Savills and with phase one designed by Robert Adam of ADAM Architecture, is in tune with the garden city concept, where well-designed homes, green space and community facilities dominate the masterplan.
http://www.investegate.co.uk/Article.aspx?id=201210050700059821N
09 August 2012 Numis reiterates its BUY recommendation for Grainger, with a target price of 161p. Investec reiterates its BUY recommendation for Grainger, with a target price of 160p. 23 August 2012 Jefferies International reiterates its BUY recommendation for Grainger, and has a target price of 128p. P.S. Here's some links about SCLP, one of the hottest stocks at the moment: http://www.euroinvestor.com/community/discussionthread.aspx?iid=2467508&threadid=256596&mode=2 http://www.euroinvestor.com/community/discussionthread.aspx?iid=2467508&threadid=255276&mode=2 http://www.euroinvestor.com/community/discussionthread.aspx?iid=2467508&threadid=257550&mode=2
Outlook Our portfolio continues to demonstrate resilience. This has resulted in sales at good margins, and we expect this robust performance to continue. Our UK residential portfolio shows strong sales volumes above vacant possession value and our German business provides predictable rental income. In addition we believe further value can be generated through offering our platform, core skills and competencies to third parties, thereby generating additional fee income to the Group.
Commenting, Andrew Cunningham, Chief Executive of Grainger, said: "Grainger continues to outperform the general residential market and we can again report strong increases in each of our three revenue streams - sales, rents and fees. "As stated previously, key strategic themes for 2012 have been to increase the proportion of profit generated from rents and fees and to reduce debt. Considerable progress has been made to achieve these and this focus will be maintained in 2013 as we continue to build sustainable sources of income."
Interim Management Statement Strong operational performance and continued reduction of debt Grainger plc ("Grainger", the "Company" or the "Group"), the UK's largest quoted residential property owner and manager, today announces its interim management statement covering its activities for the four months to 31 July 2012. Highlights Over the reporting period, Grainger has had strong operational performance, a result of our resilient portfolio, evidenced by growth in our three income streams - sales, rents and fees. We have also made further significant headway in our debt reduction programme. · Sales: o Completed Group sales in the four months to 31 July 2012 of £89.8m taking total sales in the ten months to 31 July 2012 to £202.1m, an increase of over 13% (31 July 2011: £177.8m) o UK margins on sales of vacant properties in the ten months of 39.8% (31 July 2011: 38.7%) o Strong Group sales pipeline of £264.5m (31 July 2011: £235.7m) · Gross rents in the four months to 31 July 2012 of approximately £29.7m taking total gross rents in the ten months to 31 July 2012 to £75.1m, up 7.2% (31 July 2011: £70.0m) · Fee income in the four months to 31 July 2012 of approximately £2.8m taking total fee income in the ten months to 31 July 2012 to £7.8m, up by 56% (31 July 2011: £5.0m) · Reduction in net debt of £113m since September 2011.
http://www.investegate.co.uk/Article.aspx?id=201208090700116338J
I like Grainger but not many seem to. Good profits , strong management and tight accounts. The move to London property and Germany seems well founded and they have their financing in place. I am thinking of buying for the long term based purely on the fact they have been worth a lot more and their portfolio has hardly declined in value. Am I missing something?
At the end of the half year, 62% of the firm's portfolio was located in London and the South East, compared to 53% in 2009. The dividend was slightly increased year-on-year from 0.53p to 0.55p.
"The major market indices indicate that UK national house prices have remained broadly flat over the last six months and liquidity and transaction volumes remain low. Over the last three years, Grainger has rebalanced its UK residential portfolio to focus on geographic locations where economic activity is more robust and this continues to show benefits."
Robin Broadhurst, Chairman of Grainger, said: "Grainger's residential UK portfolio valuation has risen 2.8% and sales on vacancy are being achieved at 5.7% above September 2011 vacant possession values. This demonstrates our ability to outperform the wider housing market as a result of our portfolio's strategic geographical weighting and the application of our specialist expertise and skills.
The residential UK portfolios, assisted by the strong London and South East weighting, showed a market valuation uplift of 2.8%, with UK Residential increasing by 3.1% and Retirement Solutions by 1.6%. Values in the German portfolio increased by 0.4% over the half year period. The company has continued to hack away at group net debt, which was reduced by £42m to £1,412m (September 30th 2011: £1,454m). The group expects to replicate this sort of level of debt reduction in the second half of the year.
Triple net asset value - a calculation based on the notion that any taxes due in connection with the sale of a property will reduce net asset value (NAV) accordingly - increased to 161p per share from 153p per share at the end of September. Gross NAV per share rose 3.4% to 224p from 216p six months earlier.
Operating profit before valuation movements and non-recurring items rose 7.9% to £64.1m from £59.4m the year before. Group revenue rose from £133.8m last year to £144.1m, while net rental income increased by 16.4% to £31.8m, while fee income rose 61.2% to £5.0m.