Grainger buys German company in £34m deal
Feb 5 2008 by Chris Knox, The Journal
THE UK’s biggest residential landlord is significantly extending its reach into foreign markets with the purchase of a German property firm for £34m.
Newcastle-based Grainger has swapped contracts with Frankfurt-based Francono- RheinMain in order to get a 54% stake in the company, with a view to increasing this to 100% once it receives the approval of its shareholders.
The company hopes to capitalise on what it sees as a fairly stagnant German housing market which it believes has the potential to become the most profitable in mainland Europe.
The acquisition will complement the growing £240m-plus portfolio which Grainger has built up over the last three years and has been an increasingly strong contributor to its coffers, last year adding £40m to Grainger’s revenues. It adds 2,300 apartments and houses to the 4,500 properties Grainger already owns in Germany, with a combined value of around £297m.
Andrew Cunningham, deputy chief executive at Grainger, said: “For the past few years the German property market has trailed behind many of its European counterparts. We, at Grainger, think it can only go one way and that is up, which is why we are investing heavily in this area.”
Rupert Dickinson, chief executive at Grainger, said: “FranconoRheinMain represents an excellent strategic fit with our existing portfolio in Germany and provides a strong platform for our continued growth in this market. Through this corporate acquisition, we are gaining ownership of a high quality portfolio on attractive terms, which suits our investment profile, both in terms of assets and location.”
Although Mr Cunningham said the firm was not looking to consolidate other German companies under the Grainger umbrella this year, he did not rule out the possibility of purchasing other firms in the UK.
Grainger, which saw its profits before tax increase by 62% to £77.5m and the value of its property assets grow by 25% to £2.5bn last year, is set to publish its next trading statement next week.
As the country’s largest quoted residential landlord, Grainger holds the bulk of its £2.2bn portfolio in houses rented on “regulated tenancies” in the UK.
John Dickinson, head of research at fund management group Brewin Dolphin, said: “Although Grainger will be aware of the strains elsewhere in the market, they will be confident that they can continue its impressive growth.
“There is a lot of opportunity in the German property market, with many of the building owned by manufacturers since the Second World War now being sold on to property developers.”
As part of strengthening its portfolio, last year saw Grainger raise £159m of equity from investors its G:res residential property fund.
Quinton Hill-Lines, Grainger’s director of corporate development and funds, said: “We are confident that we can generate competitive returns for our shareholders by applying our specialist asset management skills to FranconoRheinMain’s portfolio.
“In addition, we continue to see considerable demand for co-investment opportunities from investors in our existing funds and we are exploring ways to extend this model across the portfolio.”
