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Grainger announce Proposed Placing to accelerate PRS growth

Grainger plc (LON:GRI), the UK’s largest listed provider of private rental housing, today announced a proposed placing of up to 61.2 million new Ordinary Shares representing approximately 9.99% of the Company’s issued share capital. The Placing is being conducted through an accelerated bookbuild which will be launched immediately following release of this announcement.

The Placing is expected to raise gross proceeds of approximately £185 million. Including additional debt of approximately £120 million based on Company’s LTV target range, this will generate aggregate funding capacity of approximately £305 million. This funding capacity will enable the Company to accelerate its successful PRS growth strategy by committing to a further £246 million of new acquisitions into its secured pipeline. In addition, the £305 million gives the Company headroom to pursue a further £59 million of projects currently in the planning and legal pipeline.


·      The Placing is expected to enable the Company to accelerate its next phase of growth and bring forward its PRS investment pipeline, retain a robust and disciplined capital structure and enhance shareholder returns.

·      The Placing is expected to be accretive to earnings upon stabilisation.

·      The Placing will enable the Company to maintain a strong, disciplined balance sheet and operate within its targeted loan-to-value range of 40-45%.

·      The Company’s progressive dividend policy of distributing the equivalent of 50% of net rental income remains unchanged, and DPS is expected to grow despite the higher share count following the Placing.


The Placing is being conducted through an accelerated bookbuilding process (the “Bookbuild”) which will be launched immediately following this announcement. J.P. Morgan Securities plc, which conducts its UK investment banking activities as J.P. Morgan Cazenove (“J.P. Morgan Cazenove” or “JPMC”), and Numis Securities Limited (“Numis Securities”) are acting as joint bookrunners in connection with the Placing.

Background to the Placing

Since its results to 30 September 2019, the Company has made significant progress ahead of expectations, adding £246 million to its secured pipeline bringing it to a total of £978 million, and a further £91 million into its planning and legal pipeline. The Company continues to recycle assets within its portfolio to maximise value and use proceeds from its regulated tenancy and trading portfolio to reinvest into its PRS pipeline. The Company continues to identify attractive PRS investment opportunities that will enhance shareholder returns and the proceeds from today’s Placing will enable the Company to increase momentum in its PRS growth strategy, and to bring forward additional opportunities.

Positive market sentiment supports investment case

The long-term structural drivers underpinning growing demand for rental housing in the UK remain strong. The housing market is experiencing a positive uplift in sentiment in housing transactions as well as increased demand for rental homes. Following the General Election late last year, there is a focus by the UK Government on supporting growth and investment in regional cities outside of London, which supports Grainger’s targeted regional investment strategy in cities such as Birmingham, Nottingham and Cardiff.

In a recent trading update, the Company announced that it has seen positive performance in the first four months of its financial year, including strong like-for-like rental growth of 3% in its PRS portfolio and high occupancy of 97.5%. In addition, the Company confirmed that it continues its focus on operational efficiency with its stabilised gross to net at 25.2%.

Use of Proceeds

To support the funding of earnings enhancing investment opportunities

The Company has the opportunity to bring forward and accelerate four PRS schemes, bringing its total secured pipeline to £978 million, which the Placing will enable:

1.   Queens Road, NottinghamForward Funding Acquisition348 homes£56mc.7%New acquisition
2.   Exchange Square, BirminghamForward Funding Acquisition373 homes£77mc.6.5%Planning consent secured
3.   Capital Quarter, CardiffForward Funding Acquisition307 homes£57mc.7%New acquisition
4.   Canning Town 3, LondonForward Funding Acquisition132 homes£56mc.5.5%New acquisition

In addition, the Placing is expected to allow the business to progress a further £59 million of capacity to accelerate near-term schemes in the planning and legal pipeline which currently stands at £528 million.

Expected benefits and impact on returns

The Placing is expected to increase the Company’s secured PRS investment pipeline by £246 million to £978 million, delivering 4,369 homes, and provide a further £59 million of funding capacity to progress opportunities in its planning/legal pipeline. The additional funding will see the Company’s expected net rental income increase by a further £16 million when the schemes have been completed and leased, a 14% increase from the Company’s previously disclosed expected secured net rental income. Overall, the larger secured pipeline is expected to deliver an increase in the Company’s net rental income from £70 million at FY19 to £128 million upon stabilisation, a growth of over 1.8 times.

The £16 million of additional net rental income on stabilisation is projected to deliver an extra 0.69 pence to dividend per share. In the current year, the Company expects continued divided per share growth despite the increased shares in issue.

Details of the Placing

J.P. Morgan Securities plc, which conducts its UK investment banking activities as J.P. Morgan Cazenove (“J.P. Morgan Cazenove” or “JPMC”) and Numis Securities Limited (“Numis Securities” or “Numis”) are acting as joint bookrunners in connection with the Placing.

J.P. Morgan Cazenove and Numis Securities (together, the “Joint Bookrunners” and each a “Joint Bookrunner”) will commence a bookbuilding process in respect of the Placing (the “Bookbuild” or the “Bookbuilding Process”). The book will open with immediate effect. The Joint Bookrunners have entered into an agreement with Grainger (the “Placing Agreement”) under which, subject to the conditions set out therein, the Joint Bookrunners will agree to use their respective reasonable endeavours to procure subscribers for the Placing Shares at a price determined following completion of the Bookbuild and as set out in the Placing Agreement. The Placing is subject to the terms and conditions set out in the appendix to this announcement (which forms part of this announcement, together the “Announcement”). Members of the public are not entitled to participate in the Placing.

The Placing Shares will, when issued, be credited as fully paid and will rank pari passu in all respects with the existing issued Ordinary Shares of Grainger. This includes the right to receive all dividends and other distributions declared or paid in respect of such Ordinary Shares after the date of issue of the Placing Shares. The price per Ordinary Share at which the Placing Shares are to be placed (the “Placing Price”) will be determined at the close of the Bookbuild. Details of the number of Placing Shares and the Placing Price will be announced as soon as practicable after the closing of the Bookbuild. 

Application will be made for the Placing Shares to be admitted to the premium listing segment of the Official List of the Financial Conduct Authority (the “FCA”) and to trading on the main market for listed securities of London Stock Exchange plc (the “London Stock Exchange” and together, “Admission”). It is expected that Admission will take place at or around 8.00 a.m. (London time) on 17 February 2020 (or such later date as may be agreed between the Company and the Joint Bookrunners). The Placing is conditional upon, inter alia, Admission becoming effective. The Placing is also conditional upon the Placing Agreement not being terminated in accordance with its terms. 

Prior to launch of the Placing, the Company consulted with a significant number of its Shareholders to gauge their feedback as to the terms of the Placing. Feedback from this consultation was supportive and as a result the Board has chosen to proceed with the Placing. The Placing is being structured as a Bookbuild to minimise execution and market risk. The Board intends to apply the principles of pre-emption when allocating Placing Shares to those Shareholders that participate in the Placing. The Placing Shares will be issued pursuant to the allotment and disapplication of pre-emption authorities that Shareholders granted to the Company at its annual general meeting on 5 February 2020.

Helen Gordon, Grainger Chief Executive, said:

“We have real momentum in the business and now is the right time to invest for the future and increase our investment in our secured pipeline. Over the last four years, we have transformed Grainger into the UK’s leading provider of private rental homes, with c.9,000 operational rental homes and an attractive and growing pipeline of opportunities for over 9,000 more new private rental homes. Today’s placing will enable us to bring forward £246 million of investment for four new schemes, three of which are in strong regional cities, delivering 1,160 new homes, as well as expand our planning and legal pipeline, accelerating the delivery of net rental income and earnings growth.

“The outlook for the UK’s private rented sector is positive, with growing customer demand and structural undersupply supporting the investment case. With our deep knowledge and experience in the market, we are able to deliver long-term, sustainable returns through our targeted investment strategy, coupled with our strong operational platform.

“Grainger’s integrated owner-operator business model delivers enhanced returns at scale, and today’s placing will allow us to further grow our business in high-quality rental homes and deliver great service to our customers, which in turn will drive long-term shareholder value.”

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