Private equity firms Patron Capital Partners and Electra Private Equity have created a joint venture called Turbo Group and will each invest £45m into the business.
Grainger Retirement Solutions is an originator and servicer of home reversion plans. The business has around 20 staff and a portfolio of over 3,500 properties.
Patron would not confirm if Turbo would offer new plans but a spokesperson said it planned to work with the management team to identify other growth opportunities in the longer term. Patron also confirmed every staff member in the retirement division will move over to the newly formed company along with Paul Barber, currently director of Bridgewater.
Chief executive of Crown Equity Release Mark King, a home reversion firm which matches private investors with older homeowners, welcomed the sale as a positive step for the sector.
“Grainger did a great job of managing these properties but there have been changes at the top of company and as a result they decided to sell,” he said. “Electra is a solid purchaser. I welcome it because it means the properties are moving to another long-term investor, not a firm which will trade them in a cavalier City fashion and it has indicated a desire to expand the portfolio.”
He added: “I’m very positive because Paul Barber, who looks after the [retirement division] at Grainger is moving over to the new company. He would like to see the market grow as would the new owners,” he added.
Electra’s chief investment partner Alex Fortescue confirmed the deal could bring expansion for Grainger Retirement Solutions through further mergers and acquisitions.
A home reversion plan is an equity release product which involves the homeowner selling part or all of their property to the provider in exchange for a lump sum of cash. This style of product decreased in popularity when lifetime mortgages were launched in 1998 which finally saw plan sales drop to 0.2% of the market in 2013.
King said that while Bridgewater had maintained its presence in the market over the last two or three years it had sold few new plans.
Grainger’s chief executive Helen Gordon, appointed in January 2015, said the sale brought the business closer to its goal of focusing solely on the residential rented sector. Around the time of the appointment, the FT reported that Grainger was under pressure from a hedge fund shareholder to sell off homes which were rent-controlled regulated tenancies.
The transaction is expected to complete at the end of May and is still waiting for approval from the Financial Conduct Authority.
