Residential property company Grainger plc acquires HI Tricomm Holdings Limited

Grainger plc has acquired 100 per cent of HI Tricomm Holdings Limited together with related subordinated loan notes and the settlement of other balances, announced the firm Friday. Grainger acquired HI Tricomm from Invista Castle Limited, a wholly-owned subsidiary of Invista Real Estate Investment Management Holdings plc, for a total consideration of £18.5 million.

Grainger plc is the UKs largest quoted residential property company. The total consideration will be payable in cash and financed out of existing Company resources. HI Tricomm indirectly owns a high quality portfolio of 317 freehold houses in five separate locations around the Bristol and Portsmouth areas. The largely detached and terraced houses form parts of larger residential estates.

The houses were built between 2001 and 2003 under the terms of a Private Finance Initiative (PFI) project to provide dwellings for senior Ministry of Defence personnel. The portfolio is let under a long-term lease arrangement with the Secretary of State for Defence until 2028.

The portfolio currently generates a net annual rental income after property expenses of £7.8 million and will enhance Grainger’s recurring profits. The net property yield is 8.4% and it is expected that the transaction will be NAV accretive for Grainger. The current vacant possession value of the underlying assets is approximately £93 million.

HI Tricomm is currently financed by a £69.1 million senior debt facility provided by Bank of America which will be rolled over with the transaction and will expire in 2028. The weighted average fully hedged interest cost is 6.4%. The current mark to market value of the associated interest rate swap of £9.5 million has been fully reflected in the price paid, read Grainger’s press release.

Andrew Cunningham, Graingers Chief Executive said the significant portfolio acquisition is consistent with Graingers strategy to acquire high quality portfolios of residential assets delivering good long-term returns. Furthermore, stapling the existing debt to the transaction provides Grainger with a further opportunity to diversify its sources and tenor of Company financing, said Cunningham.

Grainger plc is a leading British-based residential property business. Headquartered in Newcastle upon Tyne, Grainger has approximately £2.1 billion of wholly-owned property assets and £2.8 billion of assets under management. Grainger is also the property manager for approximately 26,400 properties in the UK and Germany.

Grainger owns, acquires and trades regulated and market-let tenanted properties and has a substantial portfolio of home reversion properties. Grainger undertakes fund, property and asset management along with residential-led development.

6 Feb 2011.