Residential Secure Income (RESI) has made a major advance in its managed wind-down and Social Housing REIT (SOHO) taken a big step in its recovery strategy under Atrato after the former agreed to sell the latter its retirement property portfolio for £108.3m.
SOHO will pay RESI £45m in cash and around £62.3m in new shares to be issued at their net tangible asset value of 94.23p rather than the 72.3p at which the existing ordinary shares closed yesterday.
RESI shareholders will receive the shares in two tranches and the cash will be distributed via redeemable “B”-shares from late July after a general meeting to amend the company’s investment policy. The company has received written support from 21% of shareholders.
RESI chair Rob Whiteman said: “Reaching agreement with a larger, more liquid, London-listed investment company provides shareholders with potential for further value realisation while continuing to protect residents and uphold our responsibilities as a long-term housing provider.”
He said terms had also been agreed with a bidder for the remaining shared ownership assets RESI owns meaning that the wind-down of the company under Gresham House Asset Management begun in October 2024 could be drawing to a conclusion.
The acquisition also requires a vote by SOHO shareholders as it represents a broadening in its investment remit that began under former manager Triple Point, which was replaced by Atrato Partners at the start of last year.
Chair Jos Short said: “The proposed acquisition is a compelling opportunity to create additional long-term value for shareholders. The acquisition of this high-quality senior living portfolio materially increases our scale, broadens exposure across structurally supported living sectors, and enhances the resilience and diversification of income.
“Importantly, the transaction is expected to be high single-digit earnings accretive in the first full financial year following completion, while the equity consideration is being issued at EPRA NTA, aligning the interests of all shareholders,” he added.
Last week SOHO was boosted by news that Inclusion Housing, its largest lessee providing 30% of annual rental income, had become the first lease-based housing provider to receive a compliant governance and viability rating from the Regulator of Social Housing. In annual results last week from TR Property (TRY), fund manager Marcus Phayre-Mudge highlighted the 7.9%-yielder, a 1% holding, as a “classic turnaround story”.
Shares in RESI, a £96m real estate investment trust, firmed 0.2p to 52p in early trading. SOHO, which has a market value of £284m, was unchanged at 72.4p.
Our view
Matthew Read, senior analyst at QuotedData, said: “This looks like a pragmatic outcome for RESI shareholders and a significant strategic step for Social Housing REIT. For RESI, the sale of the retirement portfolio represents the bulk of its managed realisation and follows a lengthy sales process in a difficult market for smaller listed property companies. The proposed transaction is not a clean cash exit, but the mix of cash and SOHO shares gives shareholders both an initial return of capital and continued exposure to the assets within a larger, more liquid vehicle. There is some compromise: RESI shareholders get progress on the wind-down and a route to potential further value recovery, but part of that value now depends on SOHO’s performance and rating.
“For SOHO, the deal is more transformative. It adds a scaled senior living rental portfolio, brings long-dated debt fixed at an attractive 3.46%, and is expected to be earnings accretive. It also marks a clear evolution in strategy, with the proposed shift towards a broader “Living” REIT focused on specialised supported housing, senior living and care homes. That should improve diversification and scale, although it also introduces different operational and regulatory risks.”
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