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The UK property company has joined the rush to buy German housing, but unlike larger investors insists it is taking a long-term view of the market
Many investors in the German residential market talk about long-term plans to release value from giant portfolios they have bought by selling homes to their tenants. But not everyone in Germany believes this will happen, especially those who agree with SPD politician Franz Muntefering, who earlier this year called opportunity funds "locusts" that devour companies then quickly move on. Some observers believe short-term refinancing is more likely to provide an exit for investors.
However, UK quoted property company Grainger Trust is one investor that is happy to take a seriously long-term view. It has been investing in tenanted residential properties since 1912, buying portfolios from institutions and industrial companies and very gradually privatising them over a number of years. It has built up a portfolio worth more than euro1.5bn and is also a developer and major player in the burgeoning home reversions market.
When Grainger talks of privatising assets over a number of years, it means 10-15 years, way beyond the time horizon of most property investors, never mind the funds buying euro1bn-plus portfolios in Germany. It spent two years investigating the German market before making its debut with the purchase of a euro71.5m portfolio from Preussag Immobilien, part of the TUI Group, which has opted to focus on leisure, shipping and travel.
The portfolio is located in the Metro Ruhr area, mainly in the cities of Recklinghausen, Hamm and Herne, and comprises 1,406 homes, of which 192 are houses and the rest flats, as well as six commercial units covering around 95,000m^sup 2^ in total. The portfolio generates annual income of euro4.5m, reflecting a running yield of around 6.3%.
Grainger chief executive Rupert Dickinson says: "This deal is very similar to many Grainger has carried out in the UK. The properties were originally miners' housing and in the UK we have bought portfolios from British Coal, British Steel and Reckitt & Coleman, among others. Companies such as TUI are looking to rationalise and to tidy up their balance sheets to release capital, as are many of the German states."
He contrasts the Preussag portfolio with others...