Grainger-managed fund, G:res, is to sell £32m of properties in order to avoid breaching its loan to value covenants.

The fund, in which Grainger also holds a 21.6% stake, has decided to sell ‘non-core’ assets to reduce the debt level as part of a revised business plan by G:res1, the parent company of the fund.

Grainger said in a trading update this morning: ‘These revisions are designed to increase the headroom in the fund's loan to value covenants and thereby reduce the likelihood of a potential future breach by using cash from previous sales to reduce debt and continuing to dispose of non-core assets with a combined value of £32m.’

Since 31 December, the fund has sold or exchanged contracts on £3.7m of assets at values 8% above its valuation at that date.

Grainger, the UK’s largest listed residential landlord, also said it expected sales from its core and retirement portfolio to be down 28% to £55m in the six months leading to 31 March compared to the same period last year.

However, it said it had a further £31m of transactions in its sales pipeline – up on the £20m in same period in 2008, which assuming they completed, would lead to £114m of property sales this year.

The company, met its interest covenant test on 31 March and said the sales would put it ‘in a strong position’ for the next interest cover testing date on 30 September 2009.

It said: ‘The decline in the level of completed sales was anticipated and reflects both the decrease in general house prices and the difficult market conditions in the early part of this trading period.

'Although these difficult conditions are ongoing, the pipeline position clearly demonstrates the continuing strong liquidity characteristics of Grainger's portfolio.

‘We continue to focus on cash conservation through reduced acquisitions.

'In our core and retirement solutions portfolios, we estimate a total spend of £9m in the six months to 31 March 2009 compared to £96m for the same period in 2008.’