ReSI’s proposal to increase development capacity
ReSI is able to support the development of new homes, allowing Housing Associations and Local Authorities to deliver on profitable and socially beneficial development opportunities that they otherwise could not undertake due to financial risk constraints – whether internally or externally imposed.
ReSI facilitates increased development by enabling Registered Providers to recycle the capital currently tied up in the ownership of properties, whilst maintaining the Registered Providers’ tenant interaction and property management.
ReSI can invest in or forward fund the following types of residential assets - on a full acquisition or a joint venture basis:
Shared Ownership Housing
Comprising Market Rental Homes, Sub-Market Rental Homes and Functional Homes (e.g. care, supported living, retirement housing for residents with specific requirements)
How does ReSI achieve its own goal?
ReSI’s cost of capital is very efficient, being 2.75% on a real basis. This is achieved since ReSI’s equity investors expect to receive a real dividend of 5% and long-term debt investors will lend 50% of ReSI’s asset value at a real yield of 0.5% or below. Taking into account ReSI’s annual running costs (as a % of assets) of 0.15% and RCM’s fees of 0.5%, then ReSI is able to deliver the return expected by equity investors by acquiring assets at an average risk-adjusted real yield across its portfolio of 3.4%.
ReSI seeks to provide stable rental income to its investors by holding assets indefinitely. ReSI is not looking to trade its investment to make returns and its financial model looks only to rent and has no reliance on capital appreciation. Thus, ReSI’s economic objectives match those of Housing Associations and Local Authorities who naturally want to support their existing tenants over the long-term rather than enhance returns through accelerated market sales.
ReSI raised £180m equity capital through an IPO on 12 July 2017 from over 40 investors, largely pension funds and wealth managers acting for individual savers (e.g. SIPPs ISAs, etc.). These investors have until now not had any way of accessing the full range of social housing investments and have considerable appetite for supporting vehicles such as ReSI which allow them to gain this exposure. ReSI’s public listing enables further issuance by ReSI to tap into this demand once the initial capital is invested.
What makes ReSI attractive?