Economic strategy pays off for property giant Grainger

PROPERTY giant Grainger said its policy of concentrating on the most economically active areas is paying off.

PROPERTY giant Grainger said its policy of concentrating on the most economically active areas is paying off. The Newcastle-based company, which is Britain’s biggest residential landlord and also owns property in Germany, is now outperforming the housing market, according to its interim figures.

In the six months to the end of March, Grainger increased sales from its UK portfolio of property by 5.8% to £94.6m and its fee-based income rose by 61.2% to £5m.

This compared with the average movement in two most often-used house price measures, the Halifax and Nationwide, between October 2011 and March 2012, which fell by 0.1%.

Grainger chief executive Andrew Cunningham said: “If you take the arbiter as the Halifax and Nationwide indices, we are outperforming those indices.

“There is the geographical weighting of the portfolio in high growth areas. The Halifax and Nationwide indices are based on mortgage lending and we are selling secondhand stock and a lot are sold for cash, so it is not so dependent on mortgages.

“They tend to be lower value, they need to be refurbished.

“We generally sell them through an estate agent, but because of the type of property, we get a higher percentage of other landlords or DIY and amateur developers.”

At the end of March, 62% of Grainger’s UK portfolio was located in London and the South East, compared with 53% a year ago.

Cunningham said: “We’ve been trying to rebalance our portfolio so properties are in places we think they should be, in both the UK and Germany.

“We’ve shifted the geographical weighting over the last three years so we access the most economically active areas ... primarily London and the South East.

“It’s broader than just London. The hinterland of London is spread out over the commuter belt.

“There are specific areas that generate value. It’s making sure you are located in the right sort of areas.

“We probably have less than 1% of our portfolio in the North East.

“It has gone down over time. In the early 1990s, we first bought in the London area. That has changed a lot.”

The business reported a hike in operating profit (before valuation movements and non-recurring items) of 7.9% to £64.1m but a fall in pre-tax profits to £15.1m from £65.2m.

Grainger said the pre-tax figure was compared to a year ago when the indicator was “materially enhanced by valuation gains of £45m”.

The business also reduced its debt by £42m to £1,412m from September 30 last year.

Cunningham said that the business would concentrate on reducing debt and selling assets as they become vacant during the second half.

“We are net sellers at the moment. It’s a prudent and sensible policy,” said Cunningham.


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