REG - Residential Secure - Portfolio Update to 31 December 2023

Residential Secure IncomeAnnouncement

31/01/2024 07:00

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RNS Number : 4361B  Residential Secure Income PLC  31 January 2024

31 January 2024

Residential Secure Income plc

 

Net Asset Value and corporate update

 

Residential Secure Income plc ("ReSI plc") (LSE: RESI), which invests in
independent retirement living and shared ownership to deliver secure,
inflation-linked returns, is pleased to announce its unaudited first quarter
net asset value ("Net Asset Value" or "NAV") as at 31 December 2023 and to
update on recent corporate activity for the period.

 

Strong operational performance reflecting defensive nature of assets

·      Portfolio focused on direct leases with pensioners and part
homeowners

·      Rent collection consistent at over 99% for the quarter

·      Rental growth of 6.6% on 449 properties (15% of portfolio)
giving 1.3% like-for-like growth

·      Shared ownership portfolio fully occupied with record 96%
retirement occupancy continuing

 

Advancing sale of Local Authority Portfolio

·      Exchanged on sale for £5.8mn of assets in line with September
2023 book value, with completion scheduled to occur by early April 2024

·      As announced at year end, proceeds will be used to pay down
floating rate debt

·      Remainder of the Local Authority portfolio under offer with due
diligence advancing

 

Fully covered dividend

·      Quarterly dividend of 1.03 pence per share ("p") announced today
in line with FY24 target(3)

·      121% dividend coverage from Adjusted EPRA earnings of 1.25p

·      Local Authority Portfolio Sale is expected to reduce annualised
dividend coverage by c.6% but improve its quality through repayment of
floating rate debt

 

Valuation decline as a result of a 10 basis point outward yield shift across
the portfolio

·      Total EPRA return for the quarter of -0.8% (0.7p) to give EPRA
NTA of 80.1p (£148.3mn) as at 31 December 2023

·      Driven by a 1.3p, or 0.6% decrease in like-for-like investment
property values, as follows:

o 1.8p increase from inflation-linked rent reviews in the quarter

o 3.1p decrease resulting from a further 10 basis points outward yield shift

·      Annualised net rental yields now 5.6% in retirement and 3.5% in
shared ownership(4)

 

Resilient balance sheet with long-term and low-cost debt

·      Diverse portfolio of 3,293 homes worth £343mn

·      21-year average debt maturity, 90% fixed or index linked

·      Loan-to-value ratio of 52% and reduced to 43% when including 22%
reversionary surplus

·      Sale of local authority portfolio will allow for repayment of all
floating rate and short-term debt

 

Outlook

·      Strong rental inflation-linked growth expected to continue,
underpinned by wage/pension growth

·      Strong and accelerating institutional appetite for residential
exposure

·      Focus on driving retirement performance including rationalising
portfolio footprint, driving rents, and reducing leakage

·      Continuing to review options for further disposals which support
maximising shareholder value

·      Acute need for more affordable homes, estimated at £34bn(1)
annually

·      Particular shortage of independent retirement accommodation for
growing elderly population and accessible homeownership options providing
significant opportunity to scale these platforms and drive returns

 

NAV movement

 

The movement in NAV between 30 September 2023 and 31 December 2023 (the
"Period") is as follows:

 

 

                                 EPRA NTA                         IFRS NAV
                                 £'mn   Pence per Ordinary Share  £'mn   Pence per Ordinary Share
 NAV at 30 September 2023        151.5  81.8                      168.7  91.1
 Net income for the Period       2.3    1.3                       2.3    1.3
 Dividend paid                   (1.9)  (1.0)                     (1.9)  (1.0)
 Property valuation change       (2.4)  (1.3)                     (2.4)  (1.3)
 Debt valuation / indexation(*)  (1.2)  (0.7)                     (7.7)  (4.2)
 NAV at 31 December 2023         148.3  80.1                      159.1  85.9
 Total return                    (1.2)  (0.7)                     (7.7)  (4.2)

*In accordance with the EPRA Best Practice Recommendations, EPRA NTA reflects
the amortised cost of indebtedness, rather than its fair value, and thus the
EPRA NTA movement reflects the indexation of USS debt.

 

Ben Fry, Managing Director, Housing at Gresham House, commented:

 

"This has been a quarter of continued strong operational performance, with
high levels of rent collection, occupancy and rent growth all leading to
strong dividend cover. While this covers a period where rising long-dated gilt
yields continued to impact on valuations, we're encouraged by independent
market forecasters projecting that the interest rate hiking cycle has ended
and is turning, which should alleviate any further downward pressure on
valuation yields.

 

"We're pleased to be making good progress on the sale of our local authority
portfolio, with one asset exchanged in line with book value and the remainder
advancing through due diligence. These sales will enable the repayment of all
our floating rate debt, significantly strengthening our balance sheet. That
will allow us to strengthen the quality of our dividend cover, better
buttressing ReSI against potential future economic headwinds."

 

"Long-term demand drivers for affordable, accessible or retirement housing
remain very strong, and this continues to be a highly attractive part of the
real estate sector for us to be invested in."

 

 

For further information, please contact:

 

 

 Gresham House Real Estate

 Ben Fry                    +44 (0) 20 7382 0900

 Sandeep Patel

 Peel Hunt LLP

 Luke Simpson               +44 (0) 20 7418 8900

 Huw Jeremy

 KL Communications          gh@kl-communications.com (mailto:gh@kl-communications.com)

 Charles Gorman             +44 (0) 20 3995 6673

 Charlotte Francis

 

About ReSI plc

 

Residential Secure Income plc ("ReSI plc" LSE: RESI) is a real estate
investment trust (REIT) focused on delivering secure, inflation-linked returns
with a focus on two resident sub-sectors in UK residential - independent
retirement rentals and shared ownership - underpinned by an ageing demographic
and untapped and strong demand for affordable home ownership.

 

As at 31 December 2023 ReSI plc's portfolio comprises 3,293 properties, with
an (unaudited) IFRS fair value of £343mn(2).

 

ReSI plc's purpose is to deliver affordable, high-quality, safe homes with
great customer service and long-term stability of tenure for residents. We
achieve this through meeting demand from housing developers, housing
associations, local authorities, and private developers for long-term
investment partners to accelerate the development of socially and economically
beneficial affordable housing.

 

ReSI plc's subsidiary, ReSI Housing Limited, is registered as a for-profit
Registered Provider of social housing, and so provides a unique proposition to
its housing developer partners, being a long-term private sector landlord
within the social housing regulatory environment. As a Registered Provider,
ReSI Housing can acquire affordable housing subject to s106 planning
restrictions and housing funded by government grant.

 

About Gresham House and Gresham House Real Estate

 

Gresham House is a specialist alternative asset manager committed to operating
responsibly and sustainably, taking the long view in delivering sustainable
investment solutions.

 

Gresham House Real Estate has an unparalleled track record in the affordable
housing sector over 20 years.

 

Gresham House Real Estate offers long-term equity investments into UK housing,
through listed and unlisted housing investment vehicles, each focused on
addressing different areas of the affordable housing problem. Each fund aims
to deliver stable and secure inflation-linked returns whilst providing social
and environmental benefits to its residents, the local community, and the
wider economy.

 

Further information on ReSI plc is available at www.resi-reit.com
(http://www.resi-reit.com/) , and further information on Gresham House is
available at www.greshamhouse.com (http://www.greshamhouse.com/) .

 

 

1. British Property Federation, and Legal & General, 2022

2. Excluding the finance lease gross

3. The dividend target is a targets only and are not profit forecasts. There
can be no assurance that either target will be met, and they should not be
taken as an indication of future results.

4. Based on annualised Net Operating Income over fair value at December 2023
as measured by a independent third party valuer. Most share ownership rents
are due to increase by 9.4% on 1(st) April 2024 which is not included in this
Net Operating Income.

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