£21.3MN ACQUISITION OF LOCAL AUTHORITY HOUSING
21 June 2018
Residential Secure Income plc
£21.3 MILLION ACQUISITION OF LOCAL AUTHORITY HOUSING
Residential Secure Income plc ("ReSI" or the "Company") (LSE: RESI), which invests in residential asset classes that comprise the stock of UK social housing providers, is pleased to announce that it has exchanged contracts to acquire for a total consideration of £21.3 million a freehold residential building benefitting from a lease to a local authority and used to provide housing under the local authority's statutory obligations. The acquisition is due to complete on or before 29 June 2018, from when it will immediately be income producing to ReSI.
The building has recently undergone a full refurbishment, completed in 2016, and contains 134 self-contained residential flats. The building is located in the centre of Luton and is let to the local authority on leases with a weighted average remaining term of 7.3 years, which the Company will seek to extend or renew in due course. Luton, along with many areas across the UK and especially in south-east England, has a critical shortage of both affordable and market housing, exacerbated by the impact of reforms to the Local Housing Allowance.
The leases provide a CPI-linked upwards-only rent and pass to the local authority the responsibility for repairs to the flats and all letting risk. The Company intends to leverage the acquisition with investment grade equivalent debt secured on the building to deliver equity returns at least in line with ReSI's total return target.
Following completion of this acquisition ReSI will have invested £155 million of the proceeds raised at its IPO in assembling a portfolio which now comprises 1,772 residential units.
Ben Fry of ReSI Capital Management Ltd, ReSI's fund manager, said: "By investing capital in good quality, modern housing, we can help local authorities meet their obligations to provide accommodation without relying on expensive and short-tenure solutions such as hotels or hostels. Investments such as this provide ReSI shareholders with a local-authority backed, inflation-linked income stream underpinned by the continuing strong demand for such accommodation."
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FOR FURTHER INFORMATION, PLEASE CONTACT:
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ReSI Capital Management Limited Jonathan Slater Ben Fry Alex Pilato Mark Rogers |
+44 (0) 20 7382 0900 |
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Jefferies International Limited Stuart Klein Gary Gould |
+44 (0) 20 7029 8000 |
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FTI Consulting Richard Sunderland Claire Turvey Richard Gotla Email: resi@fticonsulting.com |
+44 (0) 20 3737 1000 |
NOTES:
Background on Local Authority housing requirements
The critical shortage of both affordable and market housing, exacerbated by reforms to the Local Housing Allowance, has left councils with a statutory duty to find housing for increasing numbers of households but without sufficient supply of permanent homes to do so. This has led to a rapidly growing need, especially in London and increasingly across south-east England. Additionally, the recently enacted Homelessness Reduction Act has put further pressure on local authorities to find housing solutions in order to prevent homelessness.
According to published reports, England had 78,930 households in Temporary Accommodation at the end of 2017, and the total amount included 120,510 children. Temporary Accommodation demand has grown by over 60% since March 2011.
The Housing Act 1996, as amended by the Homelessness Act 2002, places a duty on local authorities to secure accommodation for unintentionally homeless people who are in priority need. The Homeless Reduction Act 2017 places further duties on local authorities to prevent homelessness over and above their existing duties.
About Residential Secure Income plc
Residential Secure Income plc (LSE: RESI) is listed on the premium segment of the Official List of the UK Listing Authority and was admitted to trading on the Main Market of the London Stock Exchange in July 2017.
ReSI has been established to invest in portfolios of Homes across residential asset classes that comprise the stock of Housing Associations and Local Authorities, comprising Shared Ownership Homes and Rental Homes (being Market Rental Homes, Functional Homes and Sub-Market Rental Homes) throughout the UK.
ReSI is managed by ReSI Capital Management Limited, a wholly owned subsidiary of TradeRisks Limited which has a 17 year track record of executing transactions within the UK social housing sector and, to date, has arranged funding of over £10 billion in the social housing, care and other specialist residential property sectors.
ReSI seeks to deliver secure, long-dated, inflation-linked income returns through investment in UK social housing. It aims to meet demand from Housing Associations and Local Authorities for alternative equity-like financing sources that allows them to recycle capital back into socially and economically beneficial new housing, making a meaningful contribution to the UK housing shortage.
Homes acquired by ReSI will predominantly be on a freehold or long leasehold basis (typically 99 years or more to maturity) and benefit from long term (typically 20 years plus) inflation-adjusted cash flows. Acquisitions by ReSI will be limited to Homes with sufficient cashflows, counterparty credit quality and property security that allow the Fund Manager to arrange long-term investment grade equivalent debt.
Further information on ReSI is available at www.resi-reit.com
IMPORTANT INFORMATION:
The contents of this announcement, which have been prepared by and are the sole responsibility of ReSI, have been approved by the Fund Manager as a financial promotion solely for the purposes of section 21(2)(b) of the Financial Services and Markets Act 2000.
Save to the extent otherwise defined herein, terms used in this announcement shall, unless the context otherwise requires, bear the meanings given to them in the prospectus published by ReSI dated 22 June 2017.
This announcement may include statements that are, or may be deemed to be, "forward-looking statements". These forward-looking statements involve known and unknown risks and uncertainties, many of which are beyond ReSI's control and all of which are based on ReSI's board of directors' current beliefs and expectations about future events. These forward-looking statements may be identified by the use of forward-looking terminology, including the terms "believes", "estimates", "plans", "projects", "anticipates", "expects", "intends", "may", "will" or "should" or, in each case, their negative or other variations or comparable terminology, or by discussions of strategy, plans, objectives, goals, future events or intentions. These forward-looking statements include all matters that are not historical facts. Forward-looking statements may and often do differ materially from actual results. Any forward looking statements reflect ReSI's current view with respect to future events and are subject to risks relating to future events and other risks, uncertainties and assumptions relating to ReSI's business, the results of operations, financial condition prospects, growth and dividend policy of ReSI and the industry in which it operates. Forward-looking statements speak only as of the date they are made and cannot be relied upon as a guide to future performance. ReSI expressly disclaims any obligation or undertaking to update, review or revise any forward-looking statement contained in this announcement whether as a result of new information, future developments or otherwise.
This announcement may include references to potential transactions each of which is subject to satisfactory completion of negotiations and due diligence by the Fund Manager and its professional advisers and there can be no certainty that the ReSI will complete any of these transactions.
This information is provided by RNS, the news service of the London Stock Exchange. RNS is approved by the Financial Conduct Authority to act as a Primary Information Provider in the United Kingdom. Terms and conditions relating to the use and distribution of this information may apply. For further information, please contact rns@lseg.com or visit www.rns.com.
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