Feb

Grainger PLC, Britain’s biggest PRS landlord continues to grow its portfolio…

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Build-to-Rent:

Grainger PLC, Britain’s biggest specialist PRS investor that switched its strategy from investing in protected tenancy properties to straightforward buy-to-lets in the form of build-to-rents, announced growth of around 3 % over the 4 months to 31^st January.

A period of political uncertainty and a flat-lining economy has seen its share price rise by around 3.5% as of 5^th February.

The company
continues to demonstrate its confidence that the sector will grow
with its involvement in build-to-rent. Its forward development
pipeline as of 31^st January stands at 24 new-build
schemes. These together represent 9,104 homes and a £2billion in
investment.

Grainger manages
some of this development in-house, while entering into joint ventures
with outside parties including one £845 million deal with Transport
for London and other projected at the planning stage. The company
says its PRS investments continue to perform well, with occupancy at
97.5% and pricing around 1% above valuations.

According to City
analysts, Grainger a company that can trace its roots back 107 years,
the firm was drifting along when ex RBS director Helen Gordon took
over as Chief Executive. Its mainstay was its cash-generating stock
of 3600 regulated tenancy homes, a portfolio built-up over many
years.

These investments
house protected tenants on peppercorn rents, so the value is locked
up until the tenants vacate, or more usually when they pass away. At
that point Grainger would re-let at a market rent or sell the
property.

Grainger had also
invested heavily in the German property market under a joint venture
arrangement and was, given the increasingly restrictive German
letting laws, a capital-hungry business.

One-month after
Gordon took over in 2015 she presented her radical new strategy plan
to the City. The German venture was put on the market and eventually
sold, another branch which managed an equity-release business was
ditched, and a large bet was placed on the growing government
supported build-to-rent sector. Gordon saw the potential to create a
“cash-flow machine” which would provide a high yield and steady
returns over an extended period of time.

Analysts in the City
have admired the “turnaround” of a sleeping giant that Gordon has
achieved, and the share price and dividends are beginning to reflect
that. She parachuted herself into a difficult situation when she left
RBS and started with a completely new management team. Her success
to-date has surprised a lot of people in the City says one analyst.

Build-to-rent has
been an ideal target for Grainger to aim at, as almost 100% of it’s
competition are small-scale and smaller landlords plus the government
has projected that the country needs 1.8 million more rentals by
2025.

Helen Gordon, Chief
Executive, says of her success to-date as reported by UK Investor
Magazine:

“I am pleased to
report a period of continued momentum in our PRS growth strategy, as
the UK’s leading provider of private rental homes. We have made
good progress on a number of schemes in our pipeline, including those
in the planning process and new acquisitions. Lettings on our
recently launched schemes are progressing well and ahead of
underwriting, a testament to the quality of the design of our
buildings and customer service offering.

“We are seeing a
growing customer demand for our rental homes across the portfolio
with 97.5% occupancy and 3.5% like-for-like rental growth. Supporting
our new build investment, sales from our regulated tenancy portfolio
are transacting well, reflecting positive market sentiment.

“Since our last financial year end, we have secured two further schemes in line with our targeted investment strategy: Capital Quarter (307 PRS homes) in Cardiff for c.£57m, and our third scheme in Canning Town (132 PRS homes) for c.£55.5m. In addition, we have received planning consent for the redevelopment of one of our regulated tenancy assets in Waterloo, London

“The outlook for
Grainger in 2020 is positive. Grainger is in a strong position to
benefit from the market opportunities following the clear result of
the General Election which is already driving improved housing market
sentiment. The business is ready and equipped to deliver on our PRS
growth strategy, which in turn will deliver attractive, sustainable
returns to shareholders and, importantly, enable us to provide great
homes and great service to our growing customer base.”

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