Grainger partners with APG in €414m UK resi fund

Grainger, the UK's largest listed residential landlord, has joined forces with Dutch pension fund asset manager APG to launch a £349 mln (€414 mln) UK residential property fund.

Named GRIP, the fund has been formed by Grainger and APG Strategic Real Estate Pool to acquire the residential property portfolio owned by G:res, a UK residential property fund set up and managed by Grainger.

The move follows a decision by G:res shareholders in June 2011 to progressively liquidate the fund, in which Grainger holds a 26.2% equity stake worth £51 mln.

APG will invest £158 mln in GRIP, with Grainger putting in £59 mln, consisting of the proceeds from its stake in G:res and an additional £9 mln of new equity.

GRIP will be looking to increase its size by investing in predominantly stabilised, market-let blocks and portfolios focused on Greater London. The fund will also have scope to invest in build-to-rent development opportunities. It is structured as a long-term vehicle with five-year renewable terms.

Grainger and APG said they will be seeking additional equity from one or two other like-minded institutional investors to grow the fund further.

Grainger will provide fund, asset and property management services to GRIP via a dedicated management team led by fund manager Michael Lamyman.

The GRIP transaction follows Grainger's recently completed German JV with Heitman and is a milestone in the company's strategy of growing its fund and third-party asset management business and associated fee income.

Andrew Cunningham, chief executive of Grainger, said: 'APG's commitment is a clear acknowledgement of UK residential property's growing appeal as an institutional asset class, as well as a significant endorsement of Grainger's expertise in the UK residential sector.'

APG has been a shareholder in Grainger for several years. 'We are pleased to expand our relationship with Grainger via this partnership,' commented Robert-Jan Foortse, APG head of European real estate. 'APG has a long history of investing in residential real estate, mainly in the Netherlands. We believe prospects for the Greater London rental market are promising and we are enthusiastic about adding this exposure to our portfolio.'