Residential Sec Regulatory News (RESI)

31 January 2024

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 ownership4

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 £34bn1 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

NAV movement

The movement in NAV between 30 September 2023 and 31 December 2023 (the "Period") is as follows:

*In accordance with the EPRA Best Practice Recommendations, EPRA NTA reflects the amortised cost of indebtedness, rather than its fair value, and thus the EPRA NTA movement reflects the indexation of USS debt.

Ben Fry, Managing Director, Housing at Gresham House, commented:

"This has been a quarter of continued strong operational performance, with high levels of rent collection, occupancy and rent growth all leading to strong dividend cover. While this covers a period where rising long-dated gilt yields continued to impact on valuations, we're encouraged by independent market forecasters projecting that the interest rate hiking cycle has ended and is turning, which should alleviate any further downward pressure on valuation yields.

"We're pleased to be making good progress on the sale of our local authority portfolio, with one asset exchanged in line with book value and the remainder advancing through due diligence. These sales will enable the repayment of all our floating rate debt, significantly strengthening our balance sheet. That will allow us to strengthen the quality of our dividend cover, better buttressing ReSI against potential future economic headwinds."

"Long-term demand drivers for affordable, accessible or retirement housing remain very strong, and this continues to be a highly attractive part of the real estate sector for us to be invested in."

For further information, please contact:

About ReSI plc

Residential Secure Income plc ("ReSI plc" LSE: RESI) is a real estate investment trust (REIT) focused on delivering secure, inflation-linked returns with a focus on two resident sub-sectors in UK residential - independent retirement rentals and shared ownership - underpinned by an ageing demographic and untapped and strong demand for affordable home ownership.

As at 31 December 2023 ReSI plc's portfolio comprises 3,293 properties, with an (unaudited) IFRS fair value of £343mn2.

ReSI plc's purpose is to deliver affordable, high-quality, safe homes with great customer service and long-term stability of tenure for residents. We achieve this through meeting demand from housing developers, housing associations, local authorities, and private developers for long-term investment partners to accelerate the development of socially and economically beneficial affordable housing.

ReSI plc's subsidiary, ReSI Housing Limited, is registered as a for-profit Registered Provider of social housing, and so provides a unique proposition to its housing developer partners, being a long-term private sector landlord within the social housing regulatory environment. As a Registered Provider, ReSI Housing can acquire affordable housing subject to s106 planning restrictions and housing funded by government grant.

About Gresham House and Gresham House Real Estate

Gresham House is a specialist alternative asset manager committed to operating responsibly and sustainably, taking the long view in delivering sustainable investment solutions.

Gresham House Real Estate has an unparalleled track record in the affordable housing sector over 20 years.

Gresham House Real Estate offers long-term equity investments into UK housing, through listed and unlisted housing investment vehicles, each focused on addressing different areas of the affordable housing problem. Each fund aims to deliver stable and secure inflation-linked returns whilst providing social and environmental benefits to its residents, the local community, and the wider economy.

Further information on ReSI plc is available at www.resi-reit.com, and further information on Gresham House is available at www.greshamhouse.com.

1. British Property Federation, and Legal & General, 2022

2. Excluding the finance lease gross

3. The dividend target is a targets only and are not profit forecasts. There can be no assurance that either target will be met, and they should not be taken as an indication of future results.

4. Based on annualised Net Operating Income over fair value at December 2023 as measured by a independent third party valuer. Most share ownership rents are due to increase by 9.4% on 1st April 2024 which is not included in this Net Operating Income.