Residential Secure Income acquires 85 new build homes for shared ownership
Residential Secure Income (ReSI), which invests in affordable shared ownership, retirement and local authority housing, has exchanged contracts for GBP29 million to acquire up to 85 newly completed homes for delivery as shared ownership.
The properties are being acquired from Brick By Brick, the housing development company set up to deliver a large programme of high quality and affordable homes for local people across the London Borough of Croydon.
The transaction will allow Brick By Brick to offer these homes as shared ownership, accelerating the delivery of much-needed affordable homes and returning the proceeds of the sale to the London Borough of Croydon to be spent on frontline services. The homes will be held by ReSI’s wholly owned registered provider of social housing, ReSI Housing, and part financed by government grant.
The acquisitions will be completed in a staggered manner to align with when purchasers are ready to occupy the properties. This is expected to happen rapidly, as 90 per cent of Brick By Brick’s available homes for sale are already reserved.
The portfolio consists of one, two and three-bedroom apartments in new developments in Upper Norwood, Thornton Heath and South Croydon in South London, designed by outstanding architects, including RIBA Stirling Prize-winning Mikhail Riches. The homes have been developed to a high specification, with timber parquet flooring, Silestone worktops, Bosch appliances and private balconies. The homes meet or exceed ReSI’s sustainability criteria and include secure cycle storage, solar energy, electric vehicle charging points, and have an energy efficiency Environmental Performance Certificate rating of B or higher.
Shared ownership allows a purchaser to buy a property with a lower deposit requirement and lower annual costs, making the apartments more affordable and allowing local individuals and families to get onto the housing ladder. The homes will follow ReSI’s best practice approach, as set out in its shared ownership customer and environmental charters and will be available starting at 25% shared owner stakes on 250-year shared ownership leases.
The deal brings ReSI's total shared ownership portfolio to 281 homes and will be funded through the GBP300 million 45-year debt facility ReSI put in place in July. Upon occupation, each home will be fully income generating, with an expected inflation-linked leveraged yield which supports ReSI’s 8 per cent total return and c5 per cent dividend targets. Assuming that the shared owners each acquire approximately 25 per cent of their asset from ReSI on occupation, the acquisition commits more than half of the GBP32 million capital still required to reach ReSI’s target 50 per cent leverage.
Earlier this month, ReSI reported resilient rent collection, at more than 99 per cent for the year to September. This is in line with normal performance and was unchanged through the Covid-19 pandemic, supporting virtually flat investment valuations for the year. ReSI’s recent shared ownership deals include the July 2020 purchase of the final 73 apartments at Clapham Park, London, from Metropolitan Thames Valley Housing, and 39 houses from Step Forward, in Cheshire, Lancashire and Yorkshire, also in July.
Ben Fry, investment manager of ReSI Capital Management and head of housing at Gresham House, says: “We are delighted to help Brick By Brick increase its delivery of affordable homes, while generating a return for the London Borough of Croydon. These homes exemplify the sort of high-quality assets we seek, delivering value and housing security to first-time homeowners, and meeting the pressing housing needs of London and the rest of the UK. We see this as the start of a long-term partnership with Brick By Brick to facilitate its delivery of much needed affordable homes.
“This investment further diversifies our portfolio and is a key step to reaching full dividend cover by the beginning of October 2021. We look forward to updating shareholders on further progress in 2021.”
Colm Lacey, Chief Executive at Brick By Brick, says: “Brick By Brick’s partnership with ReSI will help us to realise the delivery of high-quality and affordable housing in Croydon and accelerate the returns we provide to our shareholder Croydon Council. ReSI’s approach means we are transacting with a registered provider of social housing that delivers best-in-class shared ownership and provides long-term housing security for Croydon’s residents.”