Grainger Share Discussion Threads

[coby4] 17/2/2016 22:10

They can't realise the reversionary surplus any quicker than they have for the last 30 years because the regs are sitting tenants. In almost all circumstances they only get vacancy and can sell when the tenant has died. They aren't moving to buy to let either. It's market rented stock purchased in volume in blocks that allow management of the freehold and achieve economies of scale. Whether that bandwagon works remains to be seen over the next few years. Unless a takeover scuppers those plans in the meantime

[jpjp100] 17/2/2016 15:30

Is the move from regulated tenancies, with nice chunks of money coming from the realisation of the reversionary surplus, towards becoming a BuyToLet landlord generally viewed as good?

[joshuar] 08/1/2016 13:29

ye, wish i had a slice of the assets from the recent sale.

still a lot of 'gold' as you put it in the company, and looking to make some quick cash wwith some buytolets.

[coby4] 07/1/2016 21:57

steadily into the hands of a takeover, lot of eyes on its gold dust reg portfolio

[yf23_1] 04/1/2016 13:27

steady as she goes

[market sniper3] 04/1/2016 12:44

GRI Grainger looking to become a pure Property Play.......



BROKERS...........

PEEL HUNT

The equity release division is being sold for £325m which
equates to c12% of Grainger’s entire portfolio. The transaction
includes £150m of attached debt and the deal will reduce
leverage and the cost of debt. The price is marginally below the
Sep ‘15 market value and after mark-to-market debt and tax
adjustments, the sale will lead to an £18m or c1% reduction in
Gross NAV. The new CEO is holding a strategy day on 28
January and today’s deal likely gives an indication of what
to expect.

JP MORGAN

The
transaction has four main benefits in our view: 1) The sale is a clear sign of
new CEO Helen Gordon's intention to streamline the business, focusing on the
residential rental sector 2). The sale lowers debt costs as the debt transferred
has a cost of 6.9% vs the group average 4.6%. 3) reinvestment could more
than double recurring net profit on the £350m of capital proceeds to £13.6m.
4) LTV post sale will fall to less than 40% from 45.5% at September 2015.

Grainger’s wide range of residential related businesses is not fully
valued by the market, and the streamlining of the business model along
with a greater focus on residential rental income will be a positive for the
equity story, in our view. CEO Helen Gordon said “this is an important
transaction for Grainger. It accelerates the transition to a business focused
on the residential rented sector and will simplify the Group. It will
materially reduce our financial and operational costs, including costs
associated with running a FCA regulated business, and will significantly
strengthen our balance sheet and capacity for investment.”
 Proceeds to be reinvested in residential rental business (PRS): We
assume the £350m proceeds are reinvested in PRS at a gross yield of 7.0%,
achievable outside of SE England markets, using a 50% debt capital
structure and incremental debt cost of LIBOR +170 bps (the refinancing rate
of the syndicate debt refinancing in FY15). This would imply net income at
a 30% cost margin of 4.9% or £17.15m, and debt costs of £3.9m for
recurring rental based Net Profit of £13.6m vs the £6.1m recurring income
from the retirement solutions business. The impact of reinvestment will not
be fully felt until the FY17 period. This would also represent a 7.8% ROE
on the £175m, clearly accretive and a step in the right direction.

[eggbaconandbubble] 29/10/2015 17:36

Three women with their hand on the helm. I wonder what the City will make of that!

[macarre] 07/10/2015 06:16

Grainger plc ("Grainger", the "Company" or the "Group"), the UK's largest listed residential property owner and manager, is pleased to confirm that yesterday Standard & Poor's Ratings Services announced it had raised its issue rating on the Company's existing £275 million senior secured notes, due 2020, to investment grade, 'BBB-' from 'BB+'.

S&P's re-rating is based on their "improved valuation of the group's assets".

The Company also announces that it has signed a refinancing of its Grainger Invest property portfolio bank facility, as planned, with the existing lenders, HSBC and Santander, reducing its cost and extending its maturity.

The Grainger Invest property portfolio comprises c. 1,200 units split over eight high quality residential blocks predominantly in central London.

The new £150m facility replaces the existing £120m facility and will represent 11% of total group facilities (£1,367m). The facility will mature in September 2020 (previously March 2016) and leaves the Company with no further significant facility maturities until 2020. The margin on the facility has been reduced by 85bps to 170bps and the structure enables further pricing benefits to be gained at future lower levels of loan to value. Covenants remain unchanged.

[shauney2] 25/9/2015 09:41

Share price looking very firm.

An interesting take on Grainger from activist investors Crystal Amber who hold a
3.45 stake.

"Grainger was established in 1912 and is the UK's largest listed residential
property owner and manager. Its traditional reversionary business is based
predominantly on regulated tenancies, which provide substantial, high quality,
predictable and resilient cash flows. Its portfolio of 7,400 reversionary
assets has a carrying value of GBP1.5 billion. Properties revert vacant to
Grainger after an average of ten years. As these properties become vacant,
Grainger estimates that they will generate a surplus of GBP500 million,
equivalent to 120p a share. This embedded value is the difference between
today's market value compared to the vacant possession value at today's
prices. It does not reflect any future benefit from house price inflation.
This portfolio is expected to generate GBP120 million of gross cash each year
until 2030. Grainger also owns 8,400 properties as part of its market rented
portfolio valued in excess of GBP1.1 billion.

The cash generated by the reversionary business is recycled into Private Rented
Sector (PRS) residential developments. Grainger is the UK market leader in
equity release schemes principally for retired home owners. It also owns 3,000
homes directly and 3,000 homes indirectly via a joint venture in Germany.

Trading results for the six months to 31 March showed a 3.8 per cent advance in
the value of its UK residential assets, compared to 1.9 per cent for the
Halifax and Nationwide indices. Grainger acquired or exchanged contracts for GBP
87 million of properties to add to its reversionary portfolio; purchased a new
build to rent scheme in Canning Town, London; achieved planning consent for
build to rent projects at two further sites; and completed another scheme in
Barking, which is now fully let. The company expects to complete around 1,070
market rented units over the next two years.

We believe that Grainger's portfolio, providing visibility of cash realisations
through to 2030, represents an attractive asset for an insurance company
seeking to match this asset profile against long- term future liabilities.
Despite a recent reduction in the average cost of debt from 5.1 per cent to 4.6
per cent on Grainger's GBP1.1 billion of debt, we believe that in the current
interest rate environment, there remains further scope to secure better terms
for shareholders. We also believe that annual administrative expenses of GBP35
million are excessive. This equates to an administrative expense ratio of 3 per
cent on GBP1.2 billion of net assets, which is substantially higher than its peer
group.

Since first investing in June 2015, we have engaged with the chairman, the
outgoing executive team and other senior participants in the property sector.
We believe that our comments about the need to reduce both operating and
finance costs together with a tighter, more focused strategic direction have
been well received. In August 2015, the company announced that it would
explore the disposal of its German assets. The Fund regards this as a helpful
first step to refocus and simplify the company's structure. The company also
confirmed that the new CEO would arrive earlier than previously announced and
that the Finance Director would retire"

The German assets were previously valued at £300 million.That could have grown since.

[shauney2] 17/8/2015 12:37

Whi ireland have a note on Grainger in their August monthly bulletin.

[coby4] 17/8/2015 11:03

article doesn't actually understand what a regulated tenancy is by the sounds of it - you don't "allow" a regulated tenant to pay under market rent - the rents and the increases allowed are set by the local Rent Officer - you don't get a choice. they will be below market rents for the duration of the tenancy - they don't normally leave unless they die and there are some circumstances where the tenancy can be passed on - hence the discount to open market value of the property which can only be realised when sold when its vacant - so no matter who might buy the company they still couldn't cash in on that reversionary surplus. the other half of the assets are from equity release schemes. puchased at an even bigger discount because there is no rent payable and the occupant has the right to stay until they die. cant cash the reversionary value in there either

a lot of good news around with this company and no real reason its share price should lag so far behind its value

good to see some refinancing and look forward to a better dividend!

[hyperboreus] 17/8/2015 10:11

Agree with you there u813061, weekend press comments fuelling the rise this morning no doubt:

Private equity outfits eyeing potential bid for Grainger, report says

By Alexander Bueso

Date: Sunday 16 Aug 2015

The pressure on the management team at Grainger to increase its payout to shareholders is growing as private equity groups run the rule over the outfit in preparation for a possible bid.
According to The Sunday Times private equity outfits are studying both a possible full-scale takeover or piecemeal asset sales.

The report came amid recent strong trading for the £1bn residential property landlord which specialises in regulated tenancies, purchasing properties at a discount while allowing their owners to live in them their entire lives at sub-market rents.

On 13 August the firm, which is listed on London's second tier index, said that in the ten months ending on 31 July rental increases had averaged 6.0% on a like-for-like basis on new lets and 2.3% on renewals, compared with 4.2% and 3.2% in July 2014.

The company, which is carrying nearly a £1bn in net debt on its balance sheet, recently refinanced its debts.

Together with its investments in market rented assets, financed from its reversionary assets, and a simplified structure, that would allow the outfit to be able to improve its profitability, and boost its payout, analysts at Numis said in a research report e-mailed to clients that same day.

"It would enable Grainger to improve distributions to shareholders, which in turn should help the share price close the discount to net asset value."

The Newcastle upon Tyne headquartered firm also disclosed it had named investment bank Lazard & Co in Frankfurt to advise on the disposal of its wholly-owned residential property assets in Germany, which it described as "non-core".

Grainger also accelerated its plans to renew its top ranks. Helen Gordon was now set to join the company as CEO designate by 1 December, earlier than previously stated.

In parallel, it was announced that Mark Greenwood would retire as finance director at the end of December 2015.

Year-to-date shares of Grainger were sporting a rise of 30% as of the close of trading on 14 August, versus a gain of 9.5% for the FTSE 250.

[u813061] 17/8/2015 09:20

Nice breakout to 5 year high.

This is a one way bet as share price is close to reported net asset value yet there is plenty of opportunity to be unlocked as activist funds are already putting plans in place.

[brahmsnliszt] 13/8/2015 06:58

You never get bankrupt by taking profit now and again.

[shauney2] 13/8/2015 06:51

Think you sold a wee bit too early based on that positive update.Looks like they taking heed of the instituitions and realising more value by selling off their German business.

[brahmsnliszt] 11/8/2015 12:28

And out today.Nice little earner.

[brahmsnliszt] 30/7/2015 08:24

Been a star performer recently for me.

[coby4] 08/7/2015 20:53

tax relief on buy to let? if the industry stumbles it may impact but still too few properties around to satisfy demand especially in the south where grainger are more focused now

[dlku] 08/7/2015 13:15

how does mortgage rule change this?

[coby4] 06/7/2015 18:46

Just goes to show they don't actually understand what the portfolio is comprised of. The reversionary element they want to get their hands on is there because the majority of the properties are occupied by protected tenants with security of tenure, Without vacant possession that can't be taken advantage of. Share price is lower than it should be though. I doubt they are going to lose too much sleep over a 3% stake. There are investors with much higher stakes

[shauney2] 05/7/2015 07:52

Going to push it even higher now hopefully.

Bidders stalk the U.K.’s top landlord Grainger in ‘£1 billion takeover’ after investment group Crystal Amber takes 3% stake: Grainger, Britain’s largest market-listed landlord, is being circled by potential bidders considering a £1 billion-plus takeover

[yf23_1] 29/6/2015 11:42

Crystal Amber stake pushing this break higher from 220 resistance.

[daveb12] 03/6/2015 14:27

This is more of a rent portfolio rather than property building therefore if lots of houses being built debateably there may be less of a demand for rentals??

Personally i am lookng at this as a slow grower. As long as they continue to increase properties in right locations, up sell each unit either existing old or new, add some some value and occasionally sell off chunks of property at a nice profi, it should be a good business. From listening to the AGM I think this is what they are trying to achieve.

Looking at a nice 5/10% growth earner over the years with an average divi.

Once the next set of results come out without all the one offs there should be a nice improvement as well.

The other building companies loking good at moment but much more upside? and possibly sell offs/profit taking?

[trytotakeiteasy] 03/6/2015 13:22

Strange that this is weak given UK house price momentum. Probably interim results were underwhelming with the NNNAV dropping to 240p.

Housebuilders have certainly rallied since the election but I think Grainger is flat. Any thoughts?

[daveb12] 18/5/2015 05:49

AGM appeared to go well - appear pretty confident - looking forward to next update on numbers which hopefully will be back to normal with no 'one off' costs