UPDATE 2-Grainger posts H1 loss, defers dividend

* H1 loss before tax 143 mln stg

* Defers dividend decision due to unpredictable market

* Expects FY total sales 144 mln stg

(Adds quotes, details)

By Daryl Loo

LONDON, May 20 (Reuters) - Grainger Plc GRI.L, the UK's largest listed residential landlord, on Wednesday reported a first-half loss before tax of 143 million pounds ($222 million) on falling property values and early debt conversion costs.

Grainger, which owns about 2.3 billion pounds in assets including rent-regulated houses and retirement homes, said it would defer any decision on dividends until after the year end due to ongoing unpredictability in the market.

“Conditions were particularly severe in the early part of this reporting period but have shown some sign of easing over the last few months,” chairman Robin Broadhurst said.

Grainger said it recorded a one-off cost in the six months to end-March due to early conversion of 78 percent of its convertible bonds, which it expects will increase net asset value by 42 million pounds.

Grainger, which owns over 14,000 properties in the UK and 7,000 in Germany, said it expects full-year sales revenue to reach 144 million pounds, and is confident of meeting its end-September interest cover covenant test well before then.

Surveys from mortgage lenders suggest activity in the UK housing market may have picked up from the all-time lows of 2008, after the Bank of England slashed interest rates to a record 0.5 percent in March to boost mortgage lending.

“However, the market is still volatile and fragile and it is too early to say that these indicators represent a permanent shift in momentum,” Broadhurst said.

UK homeowners should still brace for a potential fall of about 20 percent in value by end-2010, even as the slump in house prices slows, indicative data from the housing derivatives market showed on Monday. [ID:nLI932150] ($1=.6454 Pound) (Editing by Andrew Macdonald and Simon Jessop) (See for the global service for real estate professionals from Reuters)