Grainger plc Regulatory News (GRI)

05 February 2016

Grainger plc

Sale of German portfolio and business

Grainger plc, the UK's largest listed residential landlord, announces that it has exchanged contracts with Heitman, the global real estate investment manager, to sell its equity interest in the FRM German residential rented portfolio ("FRM Portfolio") and in its German business platform ("Grainger Deutschland GmbH") for gross consideration of €124m* (£94m).

This transaction follows the successful sale of Grainger's German JV with Heitman at the end of last year which generated a pre-tax profit of €16m (c.£11m, c.3p/share NAV benefit). 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 transaction enables Grainger to release capital to support its UK private rented sector growth.

The impact on both NNNAV and NAV will be marginal (c.-1p and -2p per share respectively). A c.€3.9m (£3.0m) loss on sale is anticipated after transaction and exit costs which will be shown as a non-recurring item. Group loan to value will improve by c.1.6%.

The FRM 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). 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.

Commenting, 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."

As at 30 September 2015, the FRM portfolio comprised c.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). It generated a gross rental income of €7.8m (£5.8m) and a loss before tax of €0.9m (£0.7m) in the last financial year.

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.

The sale of Grainger's remaining German assets (1,137 residential units) is underway.

-ENDS-

*Subject to completion adjustments.