Heitman launches European housing fund, takes over Grainger portfolio

Heitman is buying one of the last remaining German residential portfolios owned by UK listed property company Grainger.

The Chicago-headquartered fund manager will use the €124m portfolio to seed a new European residential fund, for which it hopes to raise €250m of capital from investors.

Grainger has been winding down its presence in Germany as part of strategy to focus on its domestic market. Last year, Grainger and Heitman sold a German residential porfolio, which they co-owned through a joint venture, to an unnamed “large German investor”.

In the latest transaction, Heitman will buy Grainger’s equity stake in the so-called FRM Portfolio – which includes 110 buildings located mainly in Frankfurt and Mannheim – for €55m in cash and will assume €69m of debt.

The sale of Grainger Deutschland and the 1,595 residential units means Grainger has only 1,137 units left to sell.

In addition, Heitman will take ownership of Grainger’s German business platform, which employs 21 staff in Germany.

Helen Gordon, CEO of Grainger, said: “We are pleased that Heitman has identified our platform and these assets as an attractive starting point for its new European residential fund.

“The sales process for our remaining German assets is progressing well and we look forward to updating the market in due course.”

She added: “Following the successful sale of our previous JV with Heitman at the end of the year, today’s sale takes us one step closer to our stated aim of exiting our German business in order to focus on the UK private-rented sector (PRS).”

Earlier this week, Grainger announced it was acquiring Clippers Quay, a (PRS) development scheme Salford Quays, in the north of England, worth close to £100m.

Heitman said it is likely to make more investments in Germany for its European Residential Investment Partners fund, citing “appealing demographipcs and economic growth potential”.

The fund is also likely to make investments in the Netherlands, a market where it has been active. At the end of 2014, Heitman entered into a joint venture with Orange Capital Partners to acquite two residential portfolios in Amsterdam.

Gordon Black, senior managing director for Heitman, described the latest deal as a “win-win for both Heitman and Grainger”.

He said the investment – including the “onboarding of a highly talented residential specialist team – was “indicative of Heitman’s conviction” in investing in European “living sectors”, including rented housing, student accommodation and senior housing.