The UK’s biggest stock market listed residential landlord has appointed a new chief executive as it fights off a threat from activist hedge fund, Crystal Amber.
The Guernsey-based activist fund revealed last week that it had built-up a 3 per cent stake in Grainger PLC, which invests in and manages around 20,000 mainly residential rented properties in the UK and in Germany.
At least one other UK property company and a major insurance group are understood to be looking at a bid. The group is valued on the stock market at £930million or 225p a share, but analysts believe any bid would have to be at least £1.25billion.
Around two-thirds of Grainger’s £2bn housing portfolio consists of homes with rent-controlled regulated tenancies, which it can sell as the properties become vacant.
These are legacy tenancies hailing from an era under the Rent Act (sometimes known as Rent Act tenancies) which gave tenants security of tenancies for life on peppercorn rents. Because of this their market value is far below the market levels they would have with vacant possession and therefore ideal “reversionary” investments for landlords with a long time horizon.
Crystal Amber, has a reputation for investing and then agitating management for changes in companies it sees as under-performing. It is reported that the fund manager is trying to push Grainger into offloading some of these homes more quickly and realise up to £500m in value in the process.
According to the Financial Times, on Tuesday, Grainger PLC named Helen Gordon as its new chief executive from January next year. She is expected to head off the recent challenges and will replace CEO Andrew Cunningham, who will step down in February after 20 years’ service at the company.
Although Grainger maintains the timing of the change is coincidental it will marks the third major leadership change in four months at Grainger after two recent changes of chairman.
Analysts believe the changeover timing could leave the company vulnerable when as Mike Prew, an analyst at Jefferies says:
“Crystal Amber has parked its tanks on the Grainger lawn and Grainger is under pressure.
“It is a very collegiate business, well-run, and Andrew Cunningham is highly regarded but the handover period is much too short.”
Helen Gordon takes over Grainger after her role at Royal Bank of Scotland, where she is global head of real estate asset management recently overseeing the struggling bank’s wind-down of its book of distressed property assets. Before that she was the property director of Legal & General Investment Management’s £4.5bn Life Fund.
The new chairperson, Baroness Ford said that Helen Gordon was “a recognised authority on the residential sector”. “Over the next period Grainger’s focus is on simplification of our business and accelerated execution of our private rented sector strategy,”
Grainger’s plans include selling off rent-controlled properties and developing new properties for rent at market rates. It also plans to build 2,000 homes for rent at market rates in the next two years.
— LandlordZONE® (@LandlordZONE) July 9, 2015