Moorfield sets up residential JV with Grainger

The UK private equity real estate firm Moorfield has struck up a 50:50 JV to own a home equity release company called Sovereign Reversions

The UK private equity real estate firm Moorfield has bought a 50 percent stake in residential equity release company, Sovereign Reversions, from public property company Grainger.
Sovereign, which was acquired by Grainger in June, has a property portfolio of about £69 million (€84 million; $107 million) and specialises in equity release schemes – a term used to cover ways for the elderly to get money out of the home they occupy.

In an announcement today, Grainger said it had set up a 50:50 joint venture with Moorfield, which was paying £17.5 million for its stake – half of what Grainger paid to take over Sovereign. Moorfield will also pay a further sum to cover half of the integration costs of Sovereign with Grainger’s existing business, Grainger Equity Release Limited.

Sovereigns’ core business is providing equity release products to the elderly. It essentially provides lifetime mortgages that enables an elderly customer to take a loan out against the value of the property while retaining ownership. This loan is redeemed upon death or when the client moves into long-term care facility.

Customers can also part with a share of their home or all of it in return for a loan. Again, the loan is paid back upon death or when the customer moves into a residential care home.

Moorfield is taking a stake in the company on behalf of Moorfield Real Estate Fund II, which has £390 million of equity commitments.

Grainger Equity Release Management Limited will manage the assets on behalf of the joint venture, for which it will receive an annual management fee based on gross asset value.

Andrew Cunningham, Grainger chief executive, said in a statement: “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.”