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REIT continues local authority portfolio sell-off
A real estate investment trust (REIT) is continuing to sell off its local authority portfolio as it looks to pay off its floating rate debt.
Residential Secure Income (ReSI) sold a number of its 289 local authority units in April for £5.6m, according to its interim results for the six months ending on 31 March 2024. These were a mixture of apartments and hostel-style accommodation.
ReSI said the number sold could not be disclosed, as the interim results only covered the period up to the end of March.
The unsold portion of its local authority portfolio is under offer, with a sale expected in the second half of the year. The transaction is currently going through due diligence, ReSI said.
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The sale had been delayed over the process of obtaining “building control sign-off for works already completed to upgrade fire safety systems”, it said.
The sales proceeds will be used to repay a Santander floating rate revolving credit facility in full, which must be repaid by 30 December 2024.
Because of the deadline for repayment, a material uncertainty clause has been included with the results in case ReSI is unable to pay.
The sale will also enable ReSI to consolidate its portfolio in the “strongest market segments of independent retirement living and shared ownership”, said Ben Fry, managing director of housing at Gresham House, the asset manager.
Robert Whiteman, chair of ReSI, said the investment trust was “continuing to review opportunities to make further disposals which will add value to shareholders and would prioritise the return of capital to shareholders”, alongside the local authority sale.
ReSI is managed by Gresham House and invests in independent retirement living and shared ownership. It has an investment portfolio of around 3,000 properties worth £317m.
It was launched in May 2021 to invest in the delivery of shared ownership housing through ReSI Homes, its wholly owned registered provider of social housing.
The REIT “continues to deliver strong operational performance, with high levels of rent collection, occupancy, rent growth and stabilisation of operating costs”, Mr Whiteman noted.
Mr Fry said the “quality of ReSI’s operational business model” was demonstrated by “6.5% like-for-like rental growth, consistently strong rent collection of over 99%, and record occupancy of 96% in retirement and 100% in shared ownership”.
“Whilst cost pressures remain, they have started to ease. This has enabled top-line performance to grow adjusted earnings by 9% and cover the dividend by 117%,” he added.
Gross rental income increased by 9.6% compared with the previous period, reaching £14.9m, while net rental income was up 6.8% to £9.4m.
Gresham House recently raised £125m in funding from two local government pension schemes in Gloucestershire and Devon.
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