Residential Secure Income plc
Net Asset Value and corporate update
Residential Secure Income plc (“ReSI plc”) (LSE: RESI), which invests in independent retirement living and shared ownership to deliver secure, inflation-linked returns, is pleased to announce its unaudited first quarter net asset value (“Net Asset Value” or “NAV”) as at 31 December 2023 and to update on recent corporate activity for the period.
Strong operational performance reflecting defensive nature of assets
· Portfolio focused on direct leases with pensioners and part homeowners
· Rent collection consistent at over 99% for the quarter
· Rental growth of 6.6% on 449 properties (15% of portfolio) giving 1.3% like-for-like growth
· Shared ownership portfolio fully occupied with record 96% retirement occupancy continuing
Advancing sale of Local Authority Portfolio
· Exchanged on sale for £5.8mn of assets in line with September 2023 book value, with completion scheduled to occur by early April 2024
· As announced at year end, proceeds will be used to pay down floating rate debt
· Remainder of the Local Authority portfolio under offer with due diligence advancing
Fully covered dividend
· Quarterly dividend of 1.03 pence per share (“p”) announced today in line with FY24 target3
· 121% dividend coverage from Adjusted EPRA earnings of 1.25p
· Local Authority Portfolio Sale is expected to reduce annualised dividend coverage by c.6% but improve its quality through repayment of floating rate debt
Valuation decline as a result of a 10 basis point outward yield shift across the portfolio
· Total EPRA return for the quarter of -0.8% (0.7p) to give EPRA NTA of 80.1p (£148.3mn) as at 31 December 2023
· Driven by a 1.3p, or 0.6% decrease in like-for-like investment property values, as follows:
o 1.8p increase from inflation-linked rent reviews in the quarter
o 3.1p decrease resulting from a further 10 basis points outward yield shift
· Annualised net rental yields now 5.6% in retirement and 3.5% in shared ownership
Resilient balance sheet with long-term and low-cost debt
· Diverse portfolio of 3,293 homes worth £343mn
· 21-year average debt maturity, 90% fixed or index linked
· Loan-to-value ratio of 52% and reduced to 43% when including 22% reversionary surplus
· Sale of local authority portfolio will allow for repayment of all floating rate and short-term debt
Outlook
· Strong rental inflation-linked growth expected to continue, underpinned by wage/pension growth
· Strong and accelerating institutional appetite for residential exposure
· Focus on driving retirement performance including rationalising portfolio footprint, driving rents, and reducing leakage
· Continuing to review options for further disposals which support maximising shareholder value
· Acute need for more affordable homes, estimated at £34bn annually
· Particular shortage of independent retirement accommodation for growing elderly population and accessible homeownership options providing significant opportunity to scale these platforms and drive returns
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