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Grainger , the regulated residential landlord, has increased its exposure to the German rental market by acquiring a controlling stake in FranconoRheinMain AG, emphasising that property professionals still see value in some European markets.
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Grainger bought 54 per cent of the shares at €1.50 a share, and will acquire the remainder through a tender offer at up to €1.80, taking the total consideration to almost €46m (£34.5m). FranconoRheinMain has net assets of €49.8m, and reported pre-tax profits of €8m in September. The market value of its property portfolio, comprising apartments and houses in the Rhine region, is €117m.
When completed, the deal will boost Grainger’s German portfolio by nearly 50 per cent, rising to 6,800 residential units with a market value approaching €500m. Grainger's director of corporate development, Quinton Hill-Lines, said that the company hopes to double the size of its German holdings to €1bn in the next two years: "German residential property offers better value than most other European countries," he said. "[The price paid] is less than the cost of building new units, and we are looking closely at other portfolio purchases and corporate transactions."
In a bombed out real-estate market, Grainger has used its strong cash flow position to good effect. Some might question its taste for German assets, but the acquisition is expected to impact positively on EPS and net asset value, and will utilise its existing German asset management team. We retain our good value rating at 402.5p.
Last IC view: Good value 359p 30 November 2007
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