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Residential Secure Income becomes registered provider

London-listed real estate investment trust Residential Secured Income’s subsidiary RESI Housing Limited was awarded the status of registered provider by the Regulator of Social Housing (RSH) last week.

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RESI is a wholly owned subsidiary of Traderisks.


RESI is targeting an initial spend of £360m, made up of a 50/50 debt/equity split, and plans to raise further funds from the equity market thereafter.


RESI spent £210m on 1,700 retirement homes and temporary accommodation facilities since its initial public offering (IPO) last July.


RESI’s main equity investors are large wealth managers, representing thousands of private individuals’ savings and personal pensions, thus bringing “new investors to the sector”, said Alex Pilato, chief executive of Traderisks.

 

“These are investors that have not previously had a route to invest in social housing assets, and for the sector it represents equity-like funding that it has never had access to.”


RESI sources its debt through its parent from insurance companies and pension funds.


However, its target gearing is substantially lower than the typical gearing of many housing associations, according to Mr Pilato.


“Therefore institutional investors, which generally put restrictions on the composition of asset portfolios that housing associations charge as security, are more comfortable funding entire shared ownership portfolios with RESI.”


The remaining capacity from the IPO is likely to be spent on local authority housing, retirement housing and affordable housing including shared ownership.


“Because of our ability and expertise in raising debt, the fund is able to pay attractive prices for these shared ownership portfolios.”


Mr Pilato said RESI considers itself “different from other REITs active in the social housing sector, which invest in supported housing by providing long leases to small registered providers”.


He added: “The term REIT is just a tax classification choice and nothing to do with business, culture or approach.”


Mr Pilato said that the regulator was satisfied with RESI’s business plan’s contribution to the sector. Although it does not develop properties, it brings a new source of equity to housing associations without creating new liabilities which can attract regulatory focus, he said.

 

“When a housing association reaches its debt capacity, its development delivery cannot continue. At this point, all it can do is recycle assets or enter into JVs, which are both equivalent to raising equity for a commercial enterprise. Without equity like capital coming into the sector in some form, the sector cannot develop beyond its debt capacity.”


Sage Housing, which is backed by private equity firm Blackstone, is another for-profit registered provider that has entered the sector in the past year.

 

It is drawing down an undisclosed total amount on a purchase-by-purchase basis and so far has £35.5m shares allotted, according to Companies House.


It has acquired 2,000 affordable homes via Section 106 and has 6,000 in the pipeline, according to its chief executive, Joe Cook, who spoke exclusively to Social Housing in June.

 

Not speaking directly about Sage but other equity investors in general, Mr Pilato said: “The reason RESI is a good partner is it does not have an exit strategy since our investors want long-term income streams. RESI relies on rent only, it is not interested in asset sales, and we as managers have no incentives to crystallise capital gains.”

 

He added: “RESI is a truly long-term investor in UK social housing.”

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