Grainger is the UK’s largest specialist listed residential landlord and property manager. We own £2.23bn of residential property of which 84% is located in the UK and the balance in Germany (as at September 2012). We manage 18,500 properties in the UK and 6,500 in Germany (as at September 2012).
Our business model is dedicated to ensuring Grainger is the first port of call for residential investment. Our expertise and the scale of our assets and operations enable us to generate sustainable income streams from three sources: sales, rents and fees.
Our wholly-owned portfolios of regulated tenancies and home reversion properties provide us with stable and predictable long-term cash flows made up of rental and sales. Long-term rentals in Germany add further stability and together these underpin the income we derive from open market rents and fees.
We have continued to outperform the general residential market. In the year ended 30 September 2012 the average of the two major UK housing indices (as provided by Halifax and the Nationwide) showed a fall of 1.3%. By contrast, Grainger’s UK portfolio increased in value by 3.9%. The valuations are supported by sales results in the year. Sales of property with vacant possession were made 6.1% above last year’s valuation. On a vacant possession basis, since 2004 our residential portfolio in the UK has shown cumulative valuation increases of 14.5% compared to the average index increase of 2.5%.
We will improve total returns to shareholders by:
(1) Maintaining our leading position in residential property
(2) Locating our assets in areas of higher economic activity
62% of our UK portfolio is located in London and the South East of England by value and 82% of German properties by value are located in the four most affluent regions of Germany in the West and South of the country.
(3) Increasing the proportion of non-trading income
We will continue to grow the proportion of operating profits composed of rents and fees through developing relationships with existing and future partners and building operating and management platforms. And we will build on opportunities arising in all parts of the residential property market using our core skills in property and asset management.
(4) Reducing our financial and operational gearing
As our debt and LTV ratios reduce we will match our operational gearing to our business model and we will efficiently and transparently manage interest rate derivatives. We aim to have our total group net debt down to £1bn by the end of 2013.
By changing the profiles of our asset base and income streams and by reducing gearing, we have been repositioning our business for the future. We will retain this focus which will enable the Group to take advantage of opportunities as they arise.
The Grainger of the future will have a greater proportion of its activities in the rented sector and will supplement these by leveraging its asset and property management platform in co investment vehicles and fee income business.