Newcastle-headquartered Grainger plc — the UK’s largest listed residential landlord — announced it has agreed to enter a partnership with Network Rail and Bloc Group via a joint venture called “Blocwork” to build new homes.
The news came as Grainger published results for the year to September 30, 2023, showing 12% growth in Net Rental Income to £96.5 million and 11% growth in total dividend to 6.65p per share.
That’s despite Grainger’s IFRS profit before tax plummeting to £27.4 million, down from £298.6 million in the prior year “as result of the one-off £81.2m valuation gain from the transfer of trading assets in FY22 in preparation for REIT conversion, along with a lower valuation performance.”
Adjusted earnings increased 4% to £97.6 million “as a result of another strong year of increasing net rents which were up 12%, and a resilient sales performance with vacant sales profits up despite the naturally shrinking portfolio.”
Grainger said it now has a £3.3 billion operational portfolio of 10,208 private rental homes and a £1.6 billion, 5,634-home build-to-rent pipeline.
Grainger said the new partnership with Network Rail and Bloc Group has the potential to deliver over 2,000 new purpose-built rental homes across sites in major cities across Great Britain.
Network Rail, Bloc Group and Grainger recently completed The Barnum, a 348-home build-to-rent scheme in Nottingham, with Blocwork as developer and Grainger as investor, funding the development and operating it upon completion.
Grainger CEO Helen Gordon said: “It is with great pleasure that I can report an outstanding year of record delivery and a strong performance for Grainger, growing net rental income strongly and enabling us to increase our dividend to our shareholders by 11%, while improving the rental experience for our growing number of customers.
“We are now delivering our pipeline at pace and are set to deliver market-leading earnings growth, a culmination of years of planning and implementation since setting out the company strategy in 2016. We have delivered c.1,200 new build-to-rent homes and are scheduled to deliver a further c.400 by the end of the calendar year.
“This year, we have exceeded more than £100m of annual net rental income on a passing basis, which is more than three times what it was at the start of the strategy. We now own and operate more than 10,000 rental homes nationally and this is set to grow significantly over the coming years. Our PRS portfolio now represents 77% of our operational portfolio by value.
“In the next three years, post-tax EPRA earnings will double compared to last year, as we deliver our fully-funded committed pipeline.
“Despite the macro-economic turbulence which marked the beginning of our financial year, the Grainger business has performed exceptionally well. This performance has been delivered by our market-leading operating platform, robust balance sheet and disciplined approach to capital allocation. Our property valuations held up well, underpinned by strong rental growth.
“Our capital discipline puts us in a strong position from a balance sheet perspective too, with our cost of debt fixed in the mid 3% for the next five years, enabling us to deliver on our committed pipeline and continue our growth trajectory.
“Our market-leading operating platform continues to drive value both for shareholders and residents. Occupancy in our PRS portfolio remains at an all-time high of 98.6%. Like-for-like rental growth is also strong at 8.0% for our PRS portfolio, in line with wage inflation, split between 9.2% on new lets and 7.2% on renewals, demonstrating our commitment to customer loyalty.
“Our focus on customer service is proving successful, with customer satisfaction levels continuing to rise. We are achieving industry-leading customer satisfaction levels, with our Net Promoter Score now +43, ahead of many well-known consumer brands.
“We remain very conscious of the affordability challenges facing many renters, and therefore closely monitor rent affordability in our rental communities across the UK, seeking to closely align rental increases with wage inflation.
“Our average customer rental affordability is c.28% of gross income, well below the widely accepted one-third threshold. In addition, our homes are highly energy efficient, providing our customers with lower energy bills, and many customers benefit from free Wifi, free on-site gyms, free resident lounges and co-working spaces, on-site Resident Services teams and much more.
“We are pleased today to announce a new partnership with Network Rail and bloc group, through their joint venture ‘Blocwork’, which will provide Grainger a new route for growth giving us optionality to forward fund and acquire a number of build-to-rent schemes across Network Rails’ expansive land holdings.
“We remain in a very strong position to continue to deliver great performance and a great rental experience to our customers, with everyone at Grainger committed to our collective purpose of ‘Renting homes and Enriching lives’.”