Resi becomes a REIT as it buys retirement portfolio from Aviva for £100m
Residential Secure Income (Resi) has bought a retirement home portfolio from Aviva for around £100m.
The deal means Resi formally becomes a real estate investment trust (REIT) after taking ownership of its first assets in the form of 1,341 rental homes, making up a UK-wide portfolio that is concentrated in south England.
Places for People (PfP) continues as operator of the homes, with responsibility for day-to-day management, rent collection and maintenance. Resi receives its net rent under an operational contract with PfP.
The portfolio comprises long-leasehold or freehold interests in primarily one and two bedroom, warden-assisted flats spread over more than 250 purpose-built retirement housing blocks.
The properties carry inflation-linked assured tenancies – tracking the retail price index (RPI) – let to retirement-aged residents which the REIT said offers lifetime security of tenure.
Resi said the portfolio is immediately “income producing” and allows the listed company to achieve its plan to declare its first dividend for the period ending 31 December 2017.
The company is targeting a dividend yield of 5 per cent per annum on a fully invested and geared basis, based on the issue price of 100 pence per ordinary share. It expects to increase this ‘broadly in line with inflation’ for a total return in excess of 8 per cent per annum.
Resi REIT – which listed on the London Stock Exchange in July 2017 – typically plans to acquire stock owned by UK social housing providers, and has said it has a particular interest in shared ownership portfolios.
The company said it is continuing to progress the execution of around £250m of shared ownership transactions, which are now expected to be contracted in early 2018.
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Ben Fry, investment manager of Resi Capital Management - the company’s fund manager - said: “We are delighted to have completed our first investment with the acquisition of such a strong portfolio of properties serving the retirement sector, an important and growing segment of demand.
"The portfolio is operated by one of the leading social housing providers in the Places for People group, and furthers our ambition to become the leading capital partner to social housing providers.
“We will now continue to progress the execution of our £250m pipeline and remain excited by the scale of opportunities available across the sector.”
Resi Capital Management said it has received a number of offers from institutional funders for long-dated, investment grade equivalent debt secured on the portfolio, which will deliver equity returns in excess of Resi’s total return target. It is working to complete the debt transaction with its preferred funder.
It has also identified a number of “asset management opportunities” to make operational improvements within the portfolio, which it says has the potential to enhance returns.
Its homes will predominantly be on a freehold or long leasehold basis – typically 99 years or more to maturity – with long term (typically 20 years plus) inflation-adjusted cash flows.
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