TIDMRESI
Residential Secure Income PLC
27 November 2018
Residential Secure Income: New research
27/11/18
Highlights:
-- Residential Secured Income (ReSI) targets a 5%
inflation-linked dividend yield and in excess of 8% total returns
per annum from investments in social housing.
-- Although the trust is not yet fully invested, it currently
offers a prospective yield of 5.4% should current forecasts be met.
The unleveraged yield on the underlying portfolio is 5%, in line
with the long-term target. Dividends are paid quarterly.
-- Management have shown discipline in their approach, turning
down over GBP3bn in potential deals which did not meet their
stringent criteria for investment. For this reason the trust is not
yet fully invested.
Read more
Residential Secure Income (ReSI) is a REIT that, when fully
invested, aims to generate an RPI-linked 5% dividend yield and
capital growth from investments in the social housing sector.
The trust takes a cautious approach which means it only invests
in a project when it knows it can raise investment grade debt
against the assets. This and the collapse of a few expected deals
shortly after launch in July 2017 mean that the trust is not yet
fully invested - it is at GBP240m in gross assets which will rise
to around GBP330m when the listing proceeds are fully invested and
geared. This slow pace of investment has caused the trust to slip
onto a discount relative to NAV and peers.
The trust can invest in various residential housing sub-sectors,
but concentrates on retirement housing, shared ownership housing,
as well as leasing housing to local authorities for the vulnerable.
The management team at TradeRisks, led by Ben Fry, view these types
of assets as the more secure sources of income in the sector.
Although the trust is not yet fully invested, it currently
offers a prospective yield of 5.4% should current forecasts be met.
The unleveraged yield on the underlying portfolio is 5%, in line
with the long-term target. Dividends are paid quarterly.
The trust is managed by a team at TradeRisks, which has raised
debt and advised clients in the social housing sector for 17 years.
The investment trust allows that team to plug a gap - that of
equity - in social housing financing which they have watched
develop as government grants have reduced.
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