2020 Full Year Results Announcement

Residential Secure Income Fund plc (LSE: RESI), which invests in affordable shared ownership, retirement and local authority housing, is pleased to announce its annual financial results for the period ending 30 September 2020.


Financial highlights - Resilient performance from existing portfolio

  • Robust performance through COVID-19; Operating profit before property disposals and change in fair value up 10.3% to £9.9 million (FY19: £9.0 million) - 99% of rent collected during the year to September 2020, demonstrating defensive characteristics of the portfolio - Retirement occupancy average of 91% compared to 93% in prior year - Shared ownership delayed but now 64% occupied with further 21% reserved

  • IFRS Net Asset Value Total Return of 1.4 pence per share for the year, comprising 4.9 pence recurring income, less 3.5 pence of one-off valuation reduction and shared ownership debt setup costs (FY19: total return of 7.7 pence)

  • IFRS Net Asset Value of £179.6 million, or 105.0 pence per share (FY19 108.6p)

  • Investment property valuations remained relatively stable despite COVID-19, with marginal 0.3% like for like reduction

  • Adjusted earnings per share of 2.9 pence, up 3.5% (FY19: 2.8 pence per share)

  • Total dividends for the year of 5.0 pence per share, in line with target (FY19: 5.0 pence per share)

  • Gross rental income up 5.1%, to £20.6 million (FY19: £19.6 million)

  • Weighted average debt maturity now 23 years (up from 19 years at 30 September 2019) - LTV ratio stands at 43% - Average cost of debt is now 2.7%, from 3.3% on 30 September 2019 - New shared ownership debt supported £66m of shared ownership acquisitions in year (including first tranche stakes)


*Includes legal, rating agency and other professional costs and £281k of debt arrangement costs payable to the fund manager payable under the fund management agreement.


Strong foundation for growth

  • COVID-19 delayed deployment and increased retirement voids, restricting the ability for ReSI to generate additional income in the year, however a strong platform has been built for future growth

  • Good visibility and plan to fully cover dividend: - Deploy remaining £32m to get to target leverage of 50% - Occupy remaining shared ownership homes - Address retirement portfolio voids

  • Unique ultra-long-term 45-year debt facility of £300 million successfully arranged in July 2020 in the midst of the COVID-19 pandemic with Universities Superannuation Scheme, one of the UK’s largest pension schemes - £34 million drawn in the period, secured against ReSI’s shared ownership portfolio - RPI-linked principal matches RPI-linked rent in ReSI’s shared ownership leases with 0.46% coupon delivering 300bps yield pick up on shared ownership

  • Investment Partner of Homes England (achieved in year) and Greater London Authority

  • Two new Partnership Directors joining origination team

  • Operating Expenses savings from Gresham robust central platform

Deployment and operational highlights

  • £302m portfolio of 2,708 homes comprising: 196 (£58 million, 19% by value) shared ownership homes, 289 (£34 million, 11% by value) Local Authority housing units and 2,223 (£210 million, 70% by value) Retirement Rental homes

  • Acquisition of 162 shared ownership homes, including: - 132 homes at Clapham Park in London, which ReSI committed to purchase in FY19 - 30 homes acquired across Cheshire, West Yorkshire, Greater Manchester, Lancashire and Cambridgeshire

  • Occupation of new shared ownership homes is progressing well, with 85% of ReSI’s 196 shared ownership now occupied or reserved and moving towards completion.

  • Utilised £5 million (in addition to £1 million in FY19) of government grant funding to deliver 138 homes that would not otherwise have been used as affordable housing as shared ownership

  • Appointed Elaine Bailey, former Chief Executive of Hyde Group, as a non-executive Director

  • ReSI's fund manager, ReSI Capital Management Limited, acquired in March 2020 by Gresham House, benefiting from centralised platform and buying power to reduce costs


Environmental and Social impact

  • Developed Shared Ownership Customer and Environmental Charter, with intention to improve practices across the shared ownership sector, providing benefits to both shared owners and ReSI’s investors

  • Gresham House and ReSI pleased to become early adopters of The Good Economy’s (TGE) Sustainable Reporting Standard for Social Housing – encouraging best practice ESG reporting

  • Reported energy efficiency of housing portfolio for the first time and acquired 196 shared ownership homes with an EPC rating of ‘B’, the second highest of the 7 categories A-G, while committing to improve its small number of ‘D’ rated homes

  • ReSI Housing’s status as a for-profit Registered Provider wholly owned by ReSI enables it to benefit from a best in class governance process, combining the financial rigour and checks and balances of the corporate world with the regulatory framework for Registered Providers

  • Strong social impact aligned with UK areas of most acute housing needs: - Shared ownership model quadruples access to home ownership, which remains beyond reach for middle and lower earners in the UK[i] - Retirement Rental provides fit-for-purpose homes for the over-55s, maintaining residents’ independence as well as with security of tenure - Local Authority Housing provides homes to individuals and families who are otherwise homeless

[i] There are currently only 17 English local authorities where a person on average earnings could purchase the average property with a 10% deposit


Outlook

  • ReSI’s defensive portfolio is positioned to weather economic stress, having used FY20 to build a platform of resilient cash-generative assets and long term debt to produce future income

  • Focus on covering dividend through deployment, occupation and reducing voids

  • Inflation protection, with 96% of rental income backed by contractual inflation-linked rental uplifts

  • Higher unemployment remains unlikely to materially impact ReSI’s income, with rental income rents underpinned by pensions, housing welfare, below market rents and shared owner stakes

  • Significant shortfall in UK affordable housing remains, regardless of COVID-19


Annual Report and Webinar

ReSI hosted an online webinar and Q&A session to discuss the results on 2 December 2020 at 11:00am (GMT). The replay is available here. The accompanying presentation is available on the Company's website at https://www.resi-reit.com/company-documents.


A copy of the Annual Report is also available on the Company's website at https://www.resi-reit.com/company-documents where further information on the Company can also be found. The Annual Report has also been submitted to the National Storage Mechanism and will shortly be available at https://data.fca.org.uk/#/nsm/nationalstoragemechanism.


Commenting on ReSI’s results, Robert Whiteman CBE, Chairman of ReSI said:

"Despite the backdrop of economic uncertainty caused by COVID-19 lockdowns and social distancing restrictions, we have marked 2020 with several important milestones. Investment Partner status with Homes England extends our ability to secure grant funding to support the growth of affordable housing. Meanwhile our ultra-long-term debt facility supports further deployment into assets that produce a long-term, inflation-linked income stream.”


Alex Pilato, Chief Executive of ReSI Capital Management and head of the Housing Division of Gresham House, fund manager of ReSI added:

“The demand for UK housing remains acute, and continues to rise for good quality, fit for purpose, affordable housing from young families and individuals looking for the security of their own home, retirees wanting to avoid loneliness, and those who otherwise have no-where to live.


The resilience of our business has been demonstrated during this difficult period with valuations steady and our income remaining robust as 99% of our residents continued to pay their rents in full and on time. We have a clear plan to reach full dividend coverage by FY22 which includes deploying the remaining £32m of available capital into our pipeline of new assets, securing residents for the unoccupied shared ownership homes and addressing voids in the retirement portfolio that increased during the lockdowns. We look forward to updating you further on these initiatives in 2021”.


For further information, please contact:

ReSI Capital Management Limited / Gresham House Housing

Ben Fry

Alex Pilato

+44 (0) 20 7382 0900

Jefferies International Limited

Stuart Klein

Tom Yeadon

+44 (0) 20 7029 8000

KL Communications

Charles Gorman

Camilla Esmund

Alex Hogan

+44 (0) 20 7029 8000

gh@kl-communications.com

Notes to Editors

About Residential Secure Income plc

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% per annum. ReSI’s portfolio comprises 2,708 properties, with an IFRS fair value as at 30 September 2020 of £302m.


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 £11 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.



About Gresham House plc


Gresham House is a specialist alternative asset management group, dedicated to sustainable investments across a range of strategies, with expertise across forestry, housing, infrastructure, renewable energy and battery storage, public and private equity.


Our origins stretch back to 1857, while our focus is on the future and the long term. Quoted on the London Stock Exchange (GHE:LN) we actively manage c.£3.3bn of assets on behalf of institutions, family offices, charities and endowments, private individuals and their advisers. We act responsibly within a culture of empowerment that encourages individual flair and entrepreneurial thinking.


As a signatory to the UN-supported Principles for Responsible Investment (PRI), our vision is to always make a positive social or environmental impact, while delivering on our commitments to shareholders, employees and investors.


Further information on ReSI is available at www.resi-reit.com, and further information on Gresham House is available at www.greshamhouse.com

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ReSI Capital Management Limited

21-26 Garlick Hill,

London EC4V 2AU

0207 3820900

resiplc@greshamhouse.com

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ReSI Capital Management Limited is part of the Gresham House Group.

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