The new chief executive of Newcastle-based residential landlord Grainger plc has announced plans to invest more than £850m into private rented sector assets as part of a bold strategy to drive up rental income.
Helen Gordon, took on the top job at the UK’s largest listed residential landlord at the end of 2015 and, since then, has carried out a full review of the company.
Andrew Cunningham, the company’s current chief executive, will retire following its annual general meeting in February.
In a market note to shareholders, Mrs Gordon announced a strategy update, detailing three key themes around which action will be taken – to grow rent, simply and focus and build on heritage – to take advantage of the “compelling” PRS (private rented sector) market.
Among moves to achieve that target, heavy investments are pledged, as well as divesting two divisions.
She said: “Since joining Grainger on 3rd November I have worked closely with our team, undertaking a deep review of every aspect of the business.
“I have been hugely impressed with the unrivalled knowledge and expertise our people have and the platform that has been developed.
“Our high quality regulated tenancy portfolio provides an excellent foundation from which we can grow our offering of private rented sector (“PRS”) homes.
“However, it is clear that swift and decisive action is required to capitalise on the compelling PRS market opportunity and to enable Grainger to realise its potential of being the UK’s leading private landlord. We will transition to one highly focused business that will deliver improved and sustainable, rental asset led shareholder returns.”
As part of the “grow rents” theme, the group will accelerate the acquisition of existing and newly built rental homes, re-allocate development team resources to deliver new PRS stock and refocus the acquisitions team “to improve access and conversion of PRS opportunities”.
With the business looking to “simply and focus”, it will exit non-core development assets and divest from the Retirement Solutions (Equity Release) division and Germany division, a move which, post-disposals, will reduce overheads by around 10%.
The firm plans to reduce overheads by transitioning to a simpler, streamlined structure and an operational review is under way, with an update to be provided when half year results are reported in May.
Meanwhile, it will prioritise direct investment, with no new funds, and no more focus on fee generation, and concentrate resources on two core assets – regulated tenancies and PRS – while seeking to reduce the cost of financing.
Finally, under the “Build on our heritage” theme, Mrs Gordon pledged a “continued commitment to our high quality, regulated tenancy portfolio which delivers excellent total returns and cash generation which supports our PRS growth” and to “maximise the opportunities from our market leading residential platform by exploiting our existing competitive advantages”.
Looking ahead to 2020, the PRS-led strategic targets are to invest over £850m into PRS assets to drive rental income growth and to have net rents and income more than covering overheads, expenses and financing costs. The firm is also targeting net rental income which exceeds profit from sales, and also wants dividends to increase.
The board also announced that Vanessa Simms will join the Group as finance director earlier than anticipated on Thursday, February 4.