Over 100 years Grainger has built up a large portfolio of wholly owned residential properties across the UK.
We have a significant portfolio of regulated tenancies within the UK, comprising c.4,000 properties. These unique assets are the foundation of Grainger's business, providing a strong, reliable cash income stream for many years to come. We are also increasing the size of our market rented portfolio, as the business focuses on increasing our rental income.
The regulated tenancy asset is unique in that regulated tenants have the right to live in their property their entire life and pay a sub-market rent. For this reason, we acquire these assets while they are tenanted at a discount to their vacant possession value of about 30% (also known as the reversion). This reversion does not appear in Grainger's balance sheet and is worth £527m or 127p per share as at the end of September 2013.
We crystallise this reversion when each property is sold on vacancy, having held each asset for on average over 10 years, collecting rent. These assets provide a return of between 9 and 9.5%.
The regulated tenancy portfolio, along with our home reversion portfolio within our Retirement Solutions division, is a key driver for Grainger's sales revenue.