PROPERTY company Grainger has set up a joint venture with a German firm which will take a major stake in around 3,000 properties that the Newcastle plc owns in Germany.
Grainger and global real estate investment firm Heitman have teamed up to create MH Grainger JV Sarl. The joint venture will be 75% owned by Heitman.
Grainger will retain ownership of 25% of the rental housing stock, which is spread across six German regions, and will receive fees from Heitman for managing the properties.
The North East firm, Britain’s biggest residential landlord, also owns a further 3,400 assets in Germany in addition to those involved in the Heitman deal.
The joint venture will acquire the properties, representing £185m of Grainger’s German portfolio, which is worth a total of £378m.
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.”
Grainger said that the German residential rental market is an attractive sector offering strong income generation, with limited new supply coming into the market and the potential for significant growth in the medium to long term.
The company said it has a strong track record of creating co-investment vehicles and it was “extremely pleased to be partnering with such major international institutional investors in Germany”.
Grainger chief executive Andrew Cunningham 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.
“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.”
Mark Fleetwood, an analyst at Newcastle-based N+1 Singer Equity Research, said the deal was positive news for Grainger.
“Germany has been a concern/barrier for some investors,” he said.
“This should revolutionise perception and support the investment case. The increasing focus on lower capital intensive fee-based income streams is also a positive.”