Asset manager Gresham House has acquired TradeRisks and its subsidiary ReSI Capital Management for a prospective £11m, with plans to launch new investment vehicles backed by local government pension funds.
The alternative assets specialist has agreed to pay £7m for the 19-year-old advisory and investment firm, with another £4m subject to certain performance criteria being met.
The move sees the teams at TradeRisks and ReSI Capital Management – which manage the activities of real estate investment trust (REIT) Residential Secure Income (ReSI) – move into Gresham House’s real estate division, creating a newly formed combined housing division.
Gresham said it already targets local housing investments on behalf of local government pension schemes through its British Strategic Investment Fund, and that the acquisition will enable the group to scale its social housing strategy.
Growth plans include raising fresh equity investment in ReSI as well as the prospect of new private funds targeting institutional investors as limited partnerships.
Under the terms of the acquisition, ReSI Capital Management will continue as the alternative investment fund manager of ReSI. The day-to-day operations and strategic direction will remain unchanged.
Alex Pilato – founder and chief executive of TradeRisks – becomes head of the housing division at Gresham House and also takes the chief executive role at ReSI Capital Management, following Jon Slater’s retirement.
Mr Pilato told Social Housing that Gresham is a much larger organisation with a bigger platform and infrastructure to support the TradeRisks team.
He said the move would support investment vehicles that the team are in the process of launching, bringing new-to-sector investors into social housing and local authority financing. That includes a privately funded, index-linked vehicle that could tap into pension fund investment.
“Gresham has a business in housing but clearly we are a fundamental part of their strategy to grow in that area,” he said.
“They have a lot of relationships with local government pension schemes which is really an attraction for us on the fund management [side].”
He added: “This transaction allows us to continue to grow our debt capabilities into infrastructure and other sectors, ultimately expanding our debt investor relationships, and we will work to bring these new debt investors into housing association lending.”
In return, the takeover provides Gresham with its first listed fund in the housing segment and includes £320m of assets under management (AUM) in the REIT.
ReSI – which listed on the London Stock Exchange in 2017 – reported £13.2m in pre-tax profit for the 12 months to 30 September 2019 and £8.6m in dividend payments to shareholders.
At September 2019 the portfolio included 2,677 units valued at £321.3m – inclusive of £60.6m in committed acquisitions – including more than 2,200 retirement homes, along with a smaller number of shared ownership and temporary accommodation units.
It has set up for-profit registered provider ReSI Housing, which it said has “facilitated entry into the shared ownership sector”.
David Orr, former chief executive of the National Housing Federation, chairs ReSI Housing, which Gresham reported last week has £72m of shared ownership homes.
Gresham said it expects the acquisition of TradeRisks “to be immediately earnings enhancing, increasing our AUM to £3bn and driving additional shareholder value creation”.
Of the £7m payable on completion of the acquisition, half is being paid in cash and the other half is being funded through the allotment of 555,555 ordinary shares of £0.25 each in the company, based on a share price of £6.30.
In the year ended 31 July 2019, TradeRisks reported audited profit before tax of £2.2m and gross assets of £9.7m.