Looks good going forwards- what's the catch?20 Feb 2024 18:18
Just looking at RESI first time, which looks set for v good income and/or gains, and wondering if I am missing anything?
- 1.2x covered divi of 4.12p >8% at todays price, which is not under pressure after rebase
- v good long term debt majority at 3.5% fixed with >19 years to go, most of the remainder already peaked at 1.1% +RPI capped at 5.5%, with >20 years to go
- Record demand, turning people away, nearly 100% occupancy and rent collection
- Rents increasing 9% this year
- Sticky tenants with demand not cyclical due to shared ownership & retirement units focus, unlike warehouse/retail/office
- Plan to remove the smaller FLR component of debt in early 24 by sale of social housing, under offer and already over 1/4 of units exchanged. Concerns over FLR if they are paramount seem overblown.
- Further margin improvement by reducing mtce costs and revised fees calc
- LTV still at 50% even with reduced NAV calculated Dec 23 and further mitigated by v. good loan terms
- Refurbs are organised to be accretive to income by justifying improved rents
In a year or two 50p could look cheap in the rear view mirror. Yet even with no SP increase the compounded dividends are nearly 50% gain in 5 years at todays price.
Is it just the smaller REIT size putting this under the investment radar or still recovering from a shock of temporary divi reduction?