The board of Residential Secure Income is proposing a managed wind-down of the company following a review of options for maximising shareholder value.
The company’s persistent and material share price discount to NAV and its small market cap of around £101m (which it said may be a deterrent to some potential investors due to lower share liquidity) has led the board and manager (Gresham House) to conclude that executing a managed wind-down and portfolio realisation strategy is the best course of action for shareholders.
To implement this proposal, the board said that it intends to propose resolutions to change the company’s investment policy and will send a circular to shareholders in due course.
Background
The company was launched in 2017 with the purpose of delivering affordable, high-quality, safe homes with great customer service and long-term stability of tenure for its residents. Since launch, it has assembled a residential portfolio across the independent retirement rental, shared ownership and local authority accommodation sub-sectors. As at 30 June 2024, the company’s portfolio comprised 3,125 homes (2,234 independent retirement rental homes, 757 shared ownership homes and 134 homes providing local authority accommodation).
RESI has been selling off its local authority portfolio and its sole remaining local authority asset has now exchanged for sale at a price marginally in excess of book value, with completion scheduled to occur by the end of 2024, enabling the full repayment of the company’s floating rate debt. This will concentrate RESI’s portfolio in its two preferred residential sub-sectors – independent retirement rental and shared ownership – where its portfolios are underpinned by inflation-linked leases and long-term leverage, supporting long-term shareholder returns.
The board said that the company has been significantly impacted by the wider adverse macroeconomic environment prevailing since September 2022 and the pressures affecting the real estate investment trust sector generally. Its shares have traded at a persistent discount to the prevailing NAV, greatly restricting its ability to raise further capital, develop its portfolio, and attract a wider range of investors.
It added that the investment volumes were starting to increase, with buyers targeting the acquisition of high-quality real estate portfolios with strong inflation-linked revenue streams, which it said should facilitate an orderly realisation of the portfolio over time.
Rob Whiteman CBE, chairman, commented: “The headwinds for smaller listed real estate businesses have been well flagged, and there are no quick fixes. The Board and Fund Manager are focused on maximising returns to all shareholders. Having explored a range of options with our advisors, the Board has decided that the best course of action is a proactive managed wind-down and portfolio realisation strategy over an appropriate time period. We will be asking shareholders to approve this at a general meeting in due course.
“On behalf of the Board, I would like to thank our shareholders for their continued support of the Company and its portfolio, as well as Gresham House Asset Management, our Fund Manager, for its active management of the portfolio and focus on delivering in the best interests of our shareholders.”
