Residential Secure Income shows resilience

Residential Secure Income REIT (RESI) has published its annual results for the year ended 30 September 2020 in which it shows resilience in its performance. The announcement provides a summary of the key highlights in a number of areas, and these are reproduced below.

Financial highlights – Resilient performance from existing portfolio

  • Robust performance through COVID-19; Operating profit before property disposals and change in fair value up 10.3% to £9.9 million (FY19: £9.0 million)
    • 99% of rent collected during the year to September 2020, demonstrating defensive characteristics of the portfolio
    • Retirement occupancy average of 91% compared to 93% in prior year
    • Shared ownership delayed but now 64% occupied with further 21% reserved
  • IFRS Net Asset Value Total Return of 1.4 pence per share for the year, comprising 4.9 pence recurring income, less 3.5 pence of one-off valuation reduction and shared ownership debt setup costs (FY19: total return of 7.7 pence)
  • IFRS Net Asset Value of £179.6 million, or 105.0 pence per share (FY19 108.6p)
  • Investment property valuations remained relatively stable despite COVID-19, with marginal 0.3% like for like reduction
  • Adjusted earnings per share of 2.9 pence, up 3.5% (FY19: 2.8 pence per share)
  • Total dividends for the year of 5.0 pence per share, in line with target (FY19: 5.0 pence per share)
  • Gross rental income up 5.1%, to £20.6 million (FY19: £19.6 million)
  • Weighted average debt maturity now 23 years (up from 19 years at 30 September 2019)
    • LTV ratio stands at 43%
    • Average cost of debt is now 2.7%, from 3.3% on 30 September 2019
    • New shared ownership debt supported £66m of shared ownership acquisitions in year (including first tranche stakes)

Strong foundation for growth

  • COVID-19 delayed deployment and increased retirement voids, restricting the ability for ReSI to generate additional income in the year, however a strong platform has been built for future growth
  • Good visibility and plan to fully cover dividend:
    • Deploy remaining £32m to get to target leverage of 50%
    • Occupy remaining shared ownership homes
    • Address retirement portfolio voids
  • Unique ultra-long-term 45-year debt facility of £300 million successfully arranged in July 2020 in the midst of the COVID-19 pandemic with Universities Superannuation Scheme, one of the UK’s largest pension schemes
    • £34 million drawn in the period, secured against ReSI’s shared ownership portfolio
    • RPI-linked principal matches RPI-linked rent in ReSI’s shared ownership leases with 0.46% coupon delivering 300bps yield pick up on shared ownership
  • Investment Partner of Homes England (achieved in year) and Greater London Authority
  • Two new Partnership Directors joining origination team
  • Operating Expenses savings from Gresham robust central platform

 Deployment and operational highlights 

  • £302m portfolio of 2,708 homes comprising: 196 (£58 million, 19% by value) shared ownership homes, 289 (£34 million, 11% by value) Local Authority housing units and 2,223 (£210 million, 70% by value) Retirement Rental homes
  • Acquisition of 162 shared ownership homes, including:
    • 132 homes at Clapham Park in London, which ReSI committed to purchase in FY19
    • 30 homes acquired across Cheshire, West Yorkshire, Greater Manchester, Lancashire and Cambridgeshire
  • Occupation of new shared ownership homes is progressing well, with 85% of ReSI’s 196 shared ownership now occupied or reserved and moving towards completion.
  • Utilised £5 million (in addition to £1 million in FY19) of government grant funding to deliver 138 homes that would not otherwise have been used as affordable housing as shared ownership.
  • Appointed Elaine Bailey, former Chief Executive of Hyde Group, as a non-executive Director
  • ReSI’s fund manager, ReSI Capital Management Limited, acquired in March 2020 by Gresham House, benefiting from centralised platform and buying power to reduce costs

Environmental and Social impact

  • Developed Shared Ownership Customer and Environmental Charter, with intention to improve practices across the shared ownership sector, providing benefits to both shared owners and ReSI’s investors
  • Gresham House and ReSI pleased to become early adopters of The Good Economy’s (TGE) Sustainable Reporting Standard for Social Housing – encouraging best practice ESG reporting
  • Reported energy efficiency of housing portfolio for the first time and acquired 196 shared ownership homes with an EPC rating of ‘B’, the second highest of the 7 categories A-G, while committing to improve its small number of ‘D’ rated homes
  • ReSI Housing’s status as a for-profit Registered Provider wholly owned by ReSI enables it to benefit from a best in class governance process, combining the financial rigour and checks and balances of the corporate world with the regulatory framework for Registered Providers
  • Strong social impact aligned with UK areas of most acute housing needs:
    • Shared ownership model quadruples access to home ownership, which remains beyond reach for middle and lower earners in the UK[i]
    • Retirement Rental provides fit-for-purpose homes for the over-55s, maintaining residents’ independence as well as with security of tenure
    • Local Authority Housing provides homes to individuals and families who are otherwise homeless


  • ReSI’s defensive portfolio is positioned to weather economic stress, having used FY20 to build a platform of resilient cash-generative assets and long term debt to produce future income
  • Focus on covering dividend through deployment, occupation and reducing voids
  • Inflation protection, with 96% of rental income backed by contractual inflation-linked rental uplifts
  • Higher unemployment remains unlikely to materially impact ReSI’s income, with rental income rents underpinned by pensions, housing welfare, below market rents and shared owner stakes
  • Significant shortfall in UK affordable housing remains, regardless of COVID-19

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