Heitman teams up with Grainger in EUR 230m German resi JV

Global real estate investment firm Heitman has teamed up with Grainger, the UK's largest listed residential owner, in a joint venture that will invest in a 3,000-unit German rented residential portfolio currently wholly owned by Grainger.

MH Grainger JV Sarl, as the joint venture will be called, will be 75% owned by Heitman, on behalf of a global institutional investor believed to be South Korea's NPS pension fund, and 25% owned by Grainger. The JV’s long-term strategy is aimed at maximising returns through income growth and active asset management.

In a statement, Grainger said the agreement was in line with its strategy ' to align itself with third-party institutional capital to make more efficient use of its balance sheet and operational platform'. The transaction will allow Grainger to leverage its management platform, acting as the JV’s expert partner in German residential property investment. Grainger will receive fee income for its services to the JV and also retain a strategic stake in the portfolio.

The JV will acquire a portfolio of German residential assets currently wholly owned by Grainger, representing EUR 232 mln of Grainger’s total EUR 474 mln German portfolio as at 31 March 2012. The portfolio comprises 2,985 residential units across six regions in Germany and produces an approximate annualised profit of EUR 5.2 mln, including revaluation gains.

Grainger has arranged EUR 152 mln of debt which will also be transferred to the JV, resulting in a JV LTV of 65%. The consideration payable to Grainger for the 75% stake is EUR 54 mln, subject to a normal completion balance sheet process. Consequently, Grainger’s debt will reduce by EUR 206 mln.

'With most of the assets located in high barrier to entry premier markets, Bavaria and Baden Württemberg, the JV provides a rare opportunity for institutional investment where it has formerly been difficult to gain exposure,' said Rob Reiskin, co-head of Europe at Heitman.