The UK's largest residential landlord, Grainger plc, has smashed its £1bn net debt target well ahead of schedule, following a £58.4m deal assisted by Newcastle solicitors.
The company had planned to reduce debt to under £1bn by the end of the year.
However, thanks to the sale of its south London Tilt portfolio, on which it was advised by lawyers from Bond Dickinson’s Broad Chare offices, it has already hit around £985m, a new interim management statement shows.
The portfolio, which consists of more than 300 residential units in East Dulwich, has been taken over by one of the UK’s largest private rented residential property funds, GRIP Unit Trust, which was created earlier this year by Grainger and Europe’s largest pension fund asset manager APG.
The move means Grainger’s proportionate stake in the fund is diluted from 27.3% to 24.9%, as APG is contributing a disproportionate share of the equity finance.
However, the funds Grainger receives through advisory and management fees will now increase.
Chief executive of Grainger Andrew Cunningham said: “We have had an excellent four months since we reported our half year and achieved a number of strategic objectives, including reaching our target to reduce debt to below £1bn.
“This has been supported by an increasingly-positive sentiment towards the UK housing market and the wider economy.”
Nigel Emmerson, head of residential real estate at Bond Dickinson, said: “We are pleased to have advised Grainger on the sale.
“This is one of the many significant transactions we’ve helped them to achieve and we hope the sale will allow them to reap rewards through additional fee revenue and reduced gearing.”
The interim management statement for the Newcastle-based Grainger reflects the 10 months to July 31, 2013, and also shows completed group sales rising to ï¿½258.7m, compared with £202.1m last year.
In the company’s UK residential portfolios, vacant properties were being sold at 6.7% above September 2012 vacant possession values.
Fee income, meanwhile, grew to around £9.9m, compared to £7.8m last year, while for assets held throughout the period, rental growth remained strong.
However, in line with expectations, following asset transfers to key partners and investment sales, gross rents dropped from the £75.1m recorded on July 31, 2012, to £61.5m by July 31, 2013.
Regarding future outlook, the statement said: “There is increasing optimism in the housing market in the UK and we expect to see the benefit of this reflected in sales prices in the coming months.
“In addition, an increasing number of individuals in the UK are renting, which gives us confidence in the growth prospects for our rental business.
“Our ability to generate fees will continue to benefit from the growing value of assets under management and an increasing interest among potential partners, such as institutional investors in the UK residential sector, particularly the private rented sector.”