Grainger, Dorrington Form $169M JV

LONDON—Grainger and Dorrington have acquired a portfolio of South London residential properties for $169 million (£111M). The two firms partnered in a 50/50 joint venture, Walworth Investment Properties Limited, which has been formed to buy the portfolio which was previously wholly-owned by Grainger plc.

The portfolio comprises 598 residential units and two commercial units, and produces gross rental income of approximately $9 million (£6m) annually, reflecting a gross yield of circa 5.3%.

“We know Dorrington well and consider them to be a high quality partner, with whom we share a similar long term investment view,” said Nick Jopling, executive director of property at Grainger. “As partners, we plan to build on our strong relationship with the residents of the Walworth Estate to ensure that we continue to improve the portfolio and maximize the opportunity from the investment. This is a unique portfolio, with strong prospects, and we look forward to working with Dorrington to deliver a good service and enhance value.”

The transaction crystallizes a return of 36% on Grainger's equity investment over the two year period since it took over full ownership of the portfolio in March 2011, and will also reduce group debt, in line with its previously stated debt reduction strategy. The strong return on the transaction reflects the success of Grainger's focused asset managementprogram in growing the capital value of the portfolio, and Grainger will continue thisactivity in partnership with Dorrington following the transaction. 

The joint venture has arranged a non-recourse debt facility of $91 million (£60m). The assets have been sold into the JV at Grainger's carrying value approximately $169 million (£111m). Taking into account the debt finance, Grainger's investment of around $42.5 million (£28m) in the joint venture, and allowing for working capital requirements, the immediate impact on Grainger's net debt will be a reduction of $126 million (£83m).

The portfolio was previously part of the Grainger Invest portfolio, originally purchased from the Church Commissioners in 2006 in a joint venture with Genesis Housing Group.

“This is an Estate we know well as we were under-bidders when it was originally sold in 2006,” said Trevor Moross, joint managing director of Dorrington. “Dorrington and Grainger have a very similar approach to residential investment and management. We welcome the opportunity of working with Grainger in a joint venture on an asset which is very much our core business, building on the program of repair and enhancement which Grainger have established.”