TIDMRESI
RNS Number : 9590H
Residential Secure Income PLC
30 March 2020
30 March 2020
Residential Secure Income plc
COVID-19 Update
Residential Secure Income plc ("ReSI" or the "Company") (LSE:
RESI), which invests in affordable shared ownership, retirement and
local authority housing, today provides an update on its position
with regards to the COVID-19 pandemic.
Since the onset of the crisis, our overriding priority has been
and remains the safety of our residents, stakeholders and staff.
Our property team, led by Pete Redman, are working closely with our
property managers and lessees across ReSI's portfolio to ensure we
continue to provide safe homes for our residents and shared
owners.
In addition, ReSI Capital Management has enacted its business
continuity plan, utilising the resources of both TradeRisks and its
new parent Gresham House, with full remote-working for all office
based staff.
PORTFOLIO UPDATE
Overall the Company has a defensive portfolio which has been
positioned to survive through economic stress. Since ReSI's rental
income is primarily supported by residents' pensions or housing
welfare subsidy systems, including leases to local authorities, the
Company believes that increased unemployment is unlikely to have a
material impact on performance. ReSI anticipates that the main
impact of the COVID-19 crisis will be a delay in further expanding
its income generating portfolio and an increase in void levels
within the retirement portfolio.
While it is too early to provide a clear picture of the
implications of the pandemic, a more detailed summary of the likely
impact on the Company's individual portfolios by asset class is as
follows:
Local Authority Housing
-- This portfolio, which accounted for 18% of the Company's
FY2019 net leveraged rental income, is fully leased to Luton
Borough Council, which has as AA equivalent credit rating, and
therefore no financial impact is expected.
Independent Retirement Rentals
-- Provides independent living, with no care provision, for
retirees over the age of 60, and is the Company's largest portfolio
by asset class, comprising 82% of the Company's FY2019 net
leveraged rental income.
-- The Company expects that while there will be a reduction in
tenants starting leases, this will be offset
by a reduction in voluntarily terminations of leases and those entering care homes.
-- While the retirement portfolio residents do not generally
have material underlying health conditions, their age profile does
present a risk that if COVID-19 accelerates it could cause voids to
increase. Furthermore, the time taken to recover occupancy would
also increase, given the anticipated difficulty in attracting new
tenants during a countrywide lockdown.
-- For 2020 any increase in voids is expected to be largely
offset by a reduction in transaction costs associated with tenant
turnover (e.g. letting fees for new tenants, cleaning and repair of
flats between tenants).
Shared Ownership
-- The Company does not currently anticipate any major impact on
rent collection as we have recently assessed our shared owners'
affordability and financial security, each of whom has ownership
interests in their home, and with rent underpinned by their
mortgage providers.
-- ReSI does, however, anticipate a delay in both its ability to
grow shared ownership occupancy, as well as to grow the portfolio
itself. ReSI currently has 93 completed shared ownership homes with
52 occupied, 25 in progression and 16 available. The COVID-19
crisis has made it impossible to complete the acquisition of the
remaining 73 homes in Clapham Park by the end of March, as
previously anticipated.
-- The Company is, however, continuing to see first tranche
sales to shared owners during this time, with
our sales agent moving to virtual viewings.
-- ReSI does not anticipate a long term impact on shared
ownership returns since the asset class becomes a
more attractive product in an economic downturn given it is the
most affordable method of home ownership (with lowest deposit
requirements and ongoing costs). In addition, regardless of the
COVID-19 outbreak, the country will still have a significant
shortfall of housing and this supply demand gap will most likely
become more acute through a countrywide lockdown causing reductions
in earnings and housing delivery (caused by both construction sites
closing and financial pressures on housing developers).
-- We anticipate limited staircasing in the current environment,
which reduces our need to recycle
staircasing proceeds and hence enhances our income stability.
-- For the full year 2019 shared ownership did not contribute
materially to the Company's net leveraged
rental income.
Financial Position And Dividend
-- Debt service payments are expected to be unaffected. 90% of
ReSI's debt is very long term in nature,
with only GBP14.5 million needing to be refinanced before 2043.
-- ReSI has a strong liquidity and balance sheet position with
GBP5 million of cash and positive cashflows
in all operating units.
-- The Company anticipates that it is well placed to continue to
make dividend payments and intends to deliver on this year's target
dividend of 5p per share. However, the time before the dividend is
fully
covered by net rental income is likely to be extended.
ReSI will continue to monitor the COVID-19 situation and its
potential impact on both the wider economy and the Company's
business. Further updates will be provided if and when new material
information comes to light, otherwise the Company will provide a
fuller update alongside its Interim Results in May 2020.
FOR FURTHER INFORMATION, PLEASE CONTACT:
ReSI Capital Management Limited / TradeRisks
Limited
Ben Fry
Alex Pilato
Mark Rogers
James Sly +44 (0) 20 7382 0900
Jefferies International Limited
Stuart Klein
Gary Gould +44 (0) 20 7029 8000
FTI Consulting +44 (0) 20 3727 1000
Richard Sunderland Email: resi@fticonsulting.com
Claire Turvey
Richard Gotla
Methuselah Tanyanyiwa
NOTES:
Residential Secure Income plc (LSE: RESI) is a real estate
investment trust (REIT) listed on the premium segment of the Main
Market of the London Stock Exchange with the objective of
delivering secure inflation linked returns by investing in
affordable shared ownership, retirement and Local Authority housing
throughout the UK. ReSI targets a secure, long-dated,
inflation-linked dividend of 5.0 pence per share p.a. (paid
quarterly) and a total return in excess of 8.0% p.a. and has to
date committed c. GBP300 million, assembling a portfolio of 2,680
properties.
ReSI aims to make a meaningful contribution to alleviating the
UK housing shortage by 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 new affordable housing. ReSI'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.
Acquisitions by ReSI are limited to homes with sufficient
cashflows, counterparty credit quality and property security to be
capable of supporting long -- term investment grade equivalent
debt. ReSI does not manage or operate stock and uses experienced
and credit-worthy third-party managers.
ReSI is managed by ReSI Capital Management Limited, a wholly
owned subsidiary of TradeRisks Limited which has a 19-year track
record of executing transactions within the UK social housing
sector and, to date, has arranged funding of over GBP11 billion in
the social housing, care and other specialist residential property
sectors.
TradeRisks Limited and ReSI Capital Management Limited were
acquired on 4 March 2020 by Gresham House plc, the specialist
alternative asset management business which is listed on the London
Stock Exchange and now has c.GBP3 billion of assets under
management. Gresham House plc provides funds, direct investments
and tailored investment solutions, including co-investment across a
range of highly differentiated alternative investment strategies.
The Group's expertise includes timber, renewable energy, housing
and infrastructure, strategic public and private equity (private
assets). It aims to deliver sustainable financial returns and is
committed to building long-term partnerships with clients
(institutions, family offices, high-net-worth individuals,
charities and endowments and private individuals) to help them
achieve their financial goals. Shareholder value creation will be
driven by long-term growth in earnings as a result of increasing
AUM and returns from invested capital.
Further information on ReSI is available at
www.resi-reit.com
Further information on Gresham House is available at www.greshamhouse.com
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