Grainger forms JV with property investor to buy portfolio

FTSE 250-listed residential property owner Grainger has partnered up with property investor Dorrington to create a 50/50 joint venture (JV) called Walworth Investment Properties that will acquire a portfolio of South London residential property.

The portfolio, which was previously wholly-owned by Grainger, comprises 598 residential units and two commercial units, and produces gross rental income in the region of £6.0m per annum, reflecting a gross yield of around 5.3%.

Nick Jopling, Executive Director of Property at Grainger, said: "We know Dorrington well and consider them to be a high quality partner, with whom we share a similar long term investment view.

Subscribe to MoneyWeek

Subscribe to MoneyWeek today and get your first six magazine issues absolutely FREE

Get 6 issues free

Sign up to Money Morning

Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter

Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter

Sign up

"As partners, we plan to build on our strong relationship with the residents of the Walworth Estate to ensure that we continue to improve the portfolio and maximise the opportunity from the investment. This is a unique portfolio, with strong prospects, and we look forward to working with Dorrington to deliver a good service and enhance value."

The joint venture has arranged a non-recourse debt facility of £60m. The assets have been sold into the JV at Grainger's carrying value of £111m.

Taking into account the debt finance, Grainger's investment of about £28m in the joint venture, and allowing for working capital requirements, the immediate impact on Grainger's net debt will be a reduction of around £83m.

The transaction crystallises a return of 36% on Grainger's equity investment over the two year period since it took over full ownership of the portfolio in March 2011.

The group said that the strong return on the transaction reflects the success of its focused asset management programme in growing the capital value of the portfolio and added that the creating of the JV will enable it to participate in future valuation gains and rental income from the portfolio, while crystallising the gains already achieved.

The share price rose 0.87% to 150.80p by 08:50 Monday.

NR