Grainger profit surges as portfolio climbs to £5bn

The UK’s largest institutional landlord, Grainger, has seen profit and occupancy climb over the past year as it focused on leasing a record number of homes in its £5bn portfolio. Grainger’s profit surged 53% to £152.1m for the year ended 30 September. This was largely driven by valuation gains as the FTSE 250 landlord completed a large number of schemes. In a year, Grainger’s EPRA NTA has risen 4% to 297p, a 2.6% discount to its share price of 305p at the end of September. The portfolio valuation rose £142m, up 4.5%, with the company attributing this growth to lease-up. Investment sales and voids during Covid lockdowns caused a 4% drop in net rental income to £70.6m. During the period, Grainger let 1,304 flats across four schemes in Southampton, Leeds and London during the year, driving passing net rent up 15% to £80.9m. Strong lease-up propelled occupancy from 89% at the start of the period to 94% in September, reaching 95% post-period, ahead of Grainger’s target to hit 95% by the end of the calendar year. Helen Gordon, chief executive at Grainger, said the “bounce back in occupancy” was a key success for the business, and she expects a return to pre-pandemic levels in early 2022. “[Occupancy] came back strong in the regions and then London really accelerated,” said Gordon. “That was caused by a couple of things. One of them was bringing in-house a lot of our own direct leasing and also installing technology to help us do that,” she said. This year, Grainger has recruited a number of operational roles to complement its Connect platform, which provides an end-to-end service to allow tenants to move into a building in a matter of days. In Leeds, Grainger was able to fill the 242-flat scheme in less than three months. Connect tracked over 10,000 enquiries from potential residents over the summer as the country came out of lockdown and demand picked up. “That platform is built for scale, which is good because we have 8,000 homes in the pipeline and 13 schemes onsite at this moment,” added Gordon. “Accelerating growth” At the end of the period, Grainger’s portfolio comprised 9,727 operational homes valued at £3.1bn, of which 69% (£2.1bn) is build-to-rent. Grainger is focused on growing the BTR business; this has risen from £1.7bn last year, with a £1.9bn pipeline of 8,373 homes. Of that pipeline, Grainger has secured 3,987 homes valued at £996m. Some £299m was committed across four key acquisitions over the year – a dip on the £400m committed in six schemes last year. “In this year, we’ve done joint ventures, forward funding, direct development, site acquisitions and strategic land, as well as stabilised acquisition,” said Gordon. She said Grainger expects a further 1,000 new homes to launch next year, with further expansion as new schemes come into the pipeline. “We will continue to keep topping up in our key regional cities,” she added. “We’re actually accelerating our growth.” Grainger’s rapid growth is expected to continue for the next four to five years, after which it expects to move to REIT status and focus on stabilised stock. During the year, the company prioritised new letting and tenant retention over rental growth, with a number of incentives for new tenants. As a result, Grainger reported muted like-for-like rental growth of 0.3% on its BTR assets and 1% overall. Excluding discounts and incentives, overall rental growth was 1.6% on BTR and 2% overall. “I think that will go back up to 3% next year as a long-term average,” said Gordon. “Historically, rents have always correlated with wage inflation, and we are seeing wage inflation coming through.” To send feedback, e-mail emma.rosser@eg.co.uk or tweet @EmmaARosser or @EGPropertyNews