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ReSI buys shared ownership homes from Croydon’s housing company
Residential Secure Income (ReSI) has struck a deal to acquire up to 85 shared ownership homes from the housing company owned by crisis-stricken Croydon Council.
The real estate investment trust (REIT), which owns a for-profit registered provider named ReSI Housing, has exchanged contracts with Croydon’s Brick by Brick for £29m.
It comes less than two months after Croydon Council effectively declared itself bankrupt by issuing a Section 114 notice, freezing all non-essential spending in response to a £66m budget deficit.
Weeks after this announcement, an independent review found the housing company had “significantly underperformed”. After the publication of the report, the council recommended two Brick by Brick directors be removed from the company’s board and replaced by new directors with a financial background.
The homes being acquired by ReSI will be held by ReSI Housing with acquisitions taking place in a staggered manner to align with when purchasers are ready to occupy the properties.
This process is expected to happen quickly as 90% of Brick by Brick’s available homes for sale are already reserved.
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The deal consists of one, two and three-bedroom apartments in developments in Upper Norwood, Thornton Heath and South Croydon.
Mikhail Riches, the architectural firm that won the Stirling Prize for its council housing development in Norwich last year, designed the developments.
The acquisition will be funded through a £200m, 45-year debt facility ReSI put in place in July and brings ReSI’s total shared ownership portfolio to 281 homes.
The homes will support ReSI in meeting its 8% total return and 5% dividend targets.
Since it launched in 2017, ReSI has assembled a portfolio of over 2,500 homes, including over 2,000 retirement housing units and over 250 temporary accommodation units leased to local authorities.
ReSI’s recent shared ownership deals include the purchase of 73 apartments in south London from Metropolitan Thames Valley Housing and 39 houses from Step Forward in Cheshire, Lancashire and Yorkshire.
Ben Fry, investment manager of ReSI Capital Management and head of housing at Gresham House, which owns ReSI, said: “We are delighted to help Brick By Brick increase its delivery of affordable homes, while generating a return for the London Borough of Croydon.
“These homes exemplify the sort of high-quality assets we seek, delivering value and housing security to first-time homeowners, and meeting the pressing housing needs of London and the rest of the UK.
“We see this as the start of a long-term partnership with Brick by Brick to facilitate its delivery of much-needed affordable homes.
“This investment further diversifies our portfolio and is a key step to reaching full dividend cover by the beginning of October 2021. We look forward to updating shareholders on further progress in 2021.”
Colm Lacey, chief executive at Brick by Brick, added: “Brick by Brick’s partnership with ReSI will help us to realise the delivery of high-quality and affordable housing in Croydon and accelerate the returns we provide to our shareholder Croydon Council.
“ReSI’s approach means we are transacting with a registered provider of social housing that delivers best-in-class shared ownership and provides long-term housing security for Croydon’s residents.”
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