Fund Research

Residential Secure Income

Last update 26 November 2018
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Residential Secure Income (ReSI) is a REIT that, when fully invested, aims to generate an RPI-linked 5% dividend yield and capital growth from investments in the social housing sector.

The trust takes a cautious approach which means it only invests in a project when it knows it can raise investment grade debt against the assets. This and the collapse of a few expected deals shortly after launch in July 2017 mean that the trust is not yet fully invested – it is at £240m in gross assets which will rise to around £330m when the listing proceeds are fully invested and geared. This slow pace of investment has caused the trust to slip onto a discount relative to NAV and peers.

The trust can invest in various residential housing sub-sectors, but concentrates on retirement housing, shared ownership housing, as well as leasing housing to local authorities for the vulnerable. The management team at TradeRisks, led by Ben Fry, view these types of assets as the more secure sources of income in the sector.

Although the trust is not yet fully invested, it currently offers a prospective yield of 5.4% should current forecasts be met. The unleveraged yield on the underlying portfolio is 5%, in line with the long-term target. Dividends are paid quarterly.

The trust is managed by a team at TradeRisks, which has raised debt and advised clients in the social housing sector for 17 years. The investment trust allows that team to plug a gap – that of equity - in social housing financing which they have watched develop as government grants have reduced.

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