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RESI off to a flying start

Having three operating arms is paying off nicely
November 23, 2018

Residential Secure Income REIT (RESI) was floated as recently as July 2017, and is different from the run-of-the-mill real estate investment trust. Its business model focuses on buying quality homes, usually on very long leases, and renting them out on assured tenancies to retirement-aged residents, offering them security of tenure at rents that are inflation-linked and capped at 6 per cent a year.

IC TIP: Buy at 91.6p

However, there are two other operating arms, the first trades with local authorities, which have a duty to house homeless residents and have to use expensive B&B accommodation. RESI buys local authority owned properties, giving authorities the means to build more homes and save money on expensive alternative accommodation. The third arm is shared ownership, which made an initial investment in purchasing 34 homes at a discount from Crest Nicholson (CRST) in Barnet. Using a government grant to make these into shared accommodation, RESI will sell between a quarter and three-quarters to residents and charge rent on the balance. The scheme has the added advantage of including any appreciation in the underlying asset.

The loan-to-value ratio currently stands at 22.8 per cent, and further borrowing will take this up to around 50 per cent over time. The current debt of £93m was secured at 3.47 per cent, fixed for 25 years. Resi is targeting a 5p a share dividend in 2019, giving a potential yield of 5.5 per cent.

RESIDENTIAL SECURE INCOME REIT (RESI) 
ORD PRICE:91.6pMARKET VALUE:£ 157m
TOUCH:91.2-93p12-MONTH HIGH:105pLOW: 85p
DIVIDEND YIELD:3.3%TRADING PROPERTIES:nil
DISCOUNT TO NAV:13%  
INVESTMENT PROP:£253mNET DEBT:37% 
Year to 30 Sep**Net asset value (p)Pre-tax profit (£m)Earnings per share (p)Dividend per share (p)*
201810516.19.03
% change----
Ex-div:22 Nov   
Payment:21 Dec   
*Dividends paid quarterly. Ex-Div and payment dates refer to 4th quarter dividend of 0.75p per share **Results for period 12 Jul to 30 Sep