Following its acquisition of Sovereign Reversions on 9 August, Grainger’s equity release subsidiary has entered into a 50:50 joint venture for Sovereign Reversions with MREF II Equity Release, a wholly owned subsidiary of Moorfield Real Estate Fund II. 

The Sovereign Reversions business specialises in equity release investment, advice, plan provision and plan administration.

The Sovereign Reversions property portfolio was valued at approximately GBP69m as at 30 April 2010.
 
The joint venture will be managed by a board with Grainger Equity Release and Moorfield having equal board control, notwithstanding the number of directors appointed by each party. 

Grainger Equity Release Management will manage the assets on behalf of the joint venture, for which it will receive an annual management fee based on the prevailing gross asset value which will lead to the transaction being earnings enhancing for Grainger. The transaction is expected to be NAV neutral for Grainger.
 
The Sovereign Reversions business will continue to operate as normal throughout the integration process following the acquisition and the creation of the joint venture.
 
Following receipt of the approvals, Grainger Equity Release will receive a cash consideration of GBP17.5m from Moorfield for a 50 per cent stake, representing 50 per cent of the acquisition consideration paid by Grainger Equity Release for Sovereign Reversions. In addition, Moorfield will contribute an additional sum to Grainger Equity Release to cover 50 per cent of the associated acquisition and integration costs. It is anticipated that the consideration received will be used by Grainger for general corporate purposes.
 
Peter Couch and Paul Barber will represent Grainger Equity Release on the Sovereign Reversions board. Graham Sidwell will represent Moorfield. 
 
Andrew Cunningham (pictured), chief executive of Grainger, says: “The creation of this joint venture with Moorfield is consistent with our long-established strategy of co-investing alongside partners across a range of residential sectors and of utilising third party capital to develop and grow our business.
 
“We are delighted to be working with a partner of the standing of Moorfield, whom we have known for a number of years, and share their enthusiasm for the potential not only of the joint venture’s existing assets but for the equity release investment market generally. We greatly look forward to using our scaleable operational platform and market position to create optimal value out of the portfolio and will continue to monitor potential portfolio acquisitions for the joint venture.”

Marc Gilbard, chief executive of Moorfield, adds: “We are extremely pleased to have secured our entry into this market in partnership with Grainger, the UK’s largest listed specialist residential property owner and manager, and equity release expert. We look forward to working alongside Grainger, sharing the inherent value of the acquired portfolio and business, as well as exploring future opportunities for portfolio acquisitions.”