Newcastle-based Grainger plc, the UK’s largest listed residential landlord, said on Wednesday it would buy out Grip REIT plc for £396 million from its joint venture partner, Dutch pension fund APG.

A £346.7 million rights issue will help fund the acquisition.

Grainger also said its adjusted earnings rose 26% to £94 million in the year ended September 30.

Grainger shares fell more than 5%.

“Grip is a joint venture between Grainger and APG, currently owned 75.1% by APG and 24.9% by Grainger, which comprises 35 PRS (private rented sector) assets (c.1,700 units) with a gross asset value of £696 million.

“Following the acquisition Grainger will become the 100% owner of GRIP.”

Grainger CEO Helen Gordon said: “I am pleased to announce today the acceleration of our growth strategy in the UK private rented sector with the proposed acquisition of GRIP REIT, our £696m PRS co-investment vehicle with APG, the expansion of our PRS investment pipeline to £1.37bn, and a strong set of financial results for the year.

“The GRIP portfolio, which we have managed since 2013 and therefore know very well, is an exceptional acquisition.

“It will provide a step change in our investment in the PRS market and generate increased net rental income growth, which in turn will deliver enhanced shareholder returns.

“We have a well-established strategy for growth supported by an excellent operational platform to successfully manage the enlarged PRS portfolio, ensuring that we can deliver strong returns and great homes for our customers.

“These actions will reinforce Grainger’s position as the UK market leader in the private rented sector and will deliver enhanced shareholder returns going forward as we deliver our pipeline of PRS investments.

“Today’s announcements, highlighting our acceleration of our PRS strategy, coupled with our consistently strong financial performance gives us confidence in the continued future success of the group.”