Build-to-rent landlord Grainger’s earnings grow by a quarter

Grainger predominantly lets private rented homes on the open market in towns and cities. It has 11,029 operational homes and a further 4,565 in its BTR investment pipeline. Grainger Trust, its for-profit registered provider of affordable housing, owns over 1,000 homes.

In its results, Grainger said it expects a 25% growth in earnings by 2026 and a 50% growth in earnings by 2029.

Attractive market dynamics included: rental demand, which is expected to grow by 20% between 2021 and 2031; the supply of rented housing remains constrained and is expected to worsen; the opportunity to grow market share, as BTR represents only 2.3% of the total market; and political support for BTR.

The landlord said its higher earnings resulted from strong underlying market conditions with ongoing undersupply as demand grew, and strong rental growth, which is expected to continue and is supported by inflation.

Other drivers included efficiencies in the operating business which delivered EBITDA (earnings before interest, tax, depreciation and amortisation) margin expansion from 54% to 60%, strong year-on-year compounding earnings growth and buoyant investment activity in the BTR sector, which would continue to support property valuations.

The landlord said its BTR operational portfolio was worth £3.5bn and its BTR pipeline was worth £1.3bn. Its current occupancy rate stood at 96%.

Grainger has 343 operational homes in Newcastle, 1,874 in Manchester and Liverpool, 1,318 in Birmingham, Derby and Nottingham, and 1,207 in Bristol, Exeter and Cardiff.

It also reported 1,024 operational homes in Leeds and Sheffield, 2,553 total homes, including 2,374 operational homes, in Milton Keynes, Newbury, Oxford and Guildford, and 5,236 total homes, including 2,889 operational homes, in London.

A total of 89% of its customers are aged between 20 and 44.

Helen Gordon, chief executive of Grainger, said: “Residential, specifically private rented residential, has proven its resilience through the cycle, compared with other real estate asset classes, with excellent rental growth protecting valuations, and we are seeing continued valuation growth.

“Our market is characterised by structural demand drivers, supply-constrained markets, strong customer demographics and a supportive regulatory and political backdrop which is aimed at stimulating investment activity.”

She added: “This shareholder value-creation model creates excellent, risk-adjusted returns, with a commitment to delivering a continued progressive dividend. We are increasing our interim dividend [by] 12%, reflecting our outstanding performance.”

Grainger will open new schemes in London and Bristol later this year. Its trading update will be published in September and its full-year results will be available on 20 November.