Grainger : Sells Equity Release Division

4 January 2016

Grainger Sells Equity Release Division*

Grainger, the UK's largest listed residential landlord, announces that it has exchanged contracts with Turbo Group Holdings Limited ('Turbo'), an entity owned by Patron Capital Partners and Electra Private Equity plc to sell its Equity Release Division ('Retirement Solutions'), with completion anticipated on or before 30 May 2016, subject to Turbo gaining regulatory approval from the Financial Conduct Authority (FCA).

Following the announced sale of Grainger's interest in its German Joint Venture with Heitman in November, and the planned disposal of the Group's wholly owned German assets, this transaction represents a further significant milestone in re-focusing and simplifying Grainger's business, strengthening the balance sheet and reducing financing costs.

Key financial highlights:

• Gross consideration at completion estimated at £325m, comprising c.£175m in cash proceeds and the transfer to the buyer of c.£150m of debt, secured on the assets sold;
• Net debt estimated to decrease by £325m and finance costs to reduce. The c.£150m of debt to be transferred has an average cost of 6.9% compared to an overall group rate, as at September 2015, of 4.6%;
• £55m estimated profit on sale (which will be treated as a non-recurring item);
• Group consolidated loan-to-value is estimated to reduce to below 40%, compared to 45.5% at the end September 2015;
• Accretive to NNNAV - Relative to 30 September 2015, the sale should add c.4.6p per share (£19m) to NNNAV, following adjustments for the mark-to-market on fixed rate debt and contingent tax. NAV is forecast to reduce by 4.4p per share (£18m).

Grainger intends to apply the net proceeds of the disposal to reduce debt and reinvest toward the growth of its Private Rented Sector business.

For the year to 30 September 2015, the Retirement Solutions division delivered gross sales proceeds of £35.9m, recurring profit of £6.1m and a loss before tax of £5.4m after non-recurring items.

As at 30 September 2015, the division comprised a portfolio of 3,671 residential properties predominantly subject to home reversion plans (a type of equity release product), with a market value of £327m. The sale of the division includes Grainger Equity Release Limited, Grainger Equity Release Management and Bridgewater, the home reversion brand.

Helen Gordon, Grainger's CEO, 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.'

Keith Breslauer, Managing Director of Patron Capital Partners, said:

'We are pleased to be joining forces with Electra Partners on this deal, which provides us with a strong business that has an extensive portfolio, attractive exposure to the UK residential property market and exceptional growth potential, particularly given the ageing population.'

Alex Fortescue, Chief Investment Partner of Electra Partners (manager of Electra Private Equity plc), said:

'This investment offers an attractive and low-risk return, as well as some exciting opportunities to increase the scale of the business through M&A.'

* All figures subject to completion adjustments. The sale does not include the CHARM portfolio.

-ENDS-