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Under pressure RESI registers as social housing provider

11 July 2018

Residential Secure Income becomes registered social housing provider, broadening its pool of acquisitions as real estate investment trust comes under pressure to deploy all the £180 million it raised a year ago.

Residential Secure Income (RESI) has become a registered social housing provider, broadening its pool of acquisition targets as the real estate investment trust is under pressure to deploy all the £180 million it raised at launch a year ago.

RESI shares trade 4% below net asset value (NAV), the widest discount of the four listed social housing funds, which reflects investor disappointment at its failure to hit its target of being fully invested within nine months.

The company, which has invested £155 million in three property portfolios, has registered as provider with the regulator of social housing, meaning it will now be allowed to buy properties that are designated as affordable accommodation and those that are funded by government grants.

RESI, which already targets a broader range of properties than rivals Civitas (CSH) and Triple Point (SOHO), which focus on supported housing, said in a statement it offered a ‘unique proposition to housing associations, being a long-term private-sector partner social housing landlord’.

The acquired assets will be kept within the ‘social housing regulatory environment’ and housing associations would be able to ‘free capital to fund new developments while maintaining responsibility for management, maintenance, and letting’.

Fund managers Resi Capital Management said the ‘regulatory environment for social housing emphasises good governance and financial viability, which is embraced by RESI’s existing strategy’.

This is designed to reassure investors who were shocked this year when one of Civitas's housing associations ran into financial difficulties and more recently when one of Triple Point's housing associations was placed under review by the regulator for a governance failing.

In interim results last month covering the period from its launch last July to the end of March, RESI said a 3% valuation increase in the £100 million retirement housing partnership portfolio it bought in November.

Since March the trust has made a £31.2 million purchase of a retirement portfolio comprising 277 properties from First Port, the UK largest residential property management group, and acquired 134 local authority flats in Luton for £21.3 million.

At the time Jonathan Slater, chief executive of fund manager RESI Capital Management, said acquiring portfolios ‘required us to be patient’ but ‘we have now developed good momentum in deploying RESI’s capital’ with the company undertaking due diligence to complete another £54 million of acquisitions.

RESI shares currently yield 3.2% having paid a 1.5p per share dividend out of a 3p target for the current financial year. The company's broker Jefferies today said RESI was on track to pay a fully covered 5p per share dividend next year.

‘With all rental income streams linked to inflation (RPI or CPI) which should flow to divi growth, RESI is well positioned to meet its 8% total return target in FY19,’ said analyst Andrew Gill.

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