A new vehicle created to buy housing association and council homes says that it could provide development finance to get development schemes off the ground.
Residential Secure Income (ReSI) this week announced that it has raised gross proceeds of £180m through a share issue launched last month.
The real estate investment trust will borrow an equivalent amount and use the proceeds to buy existing properties from public housing providers on a freehold or long-term lease basis.
However, Jonathan Slater, joint chief executive of corporate finance firm TradeRisks, which is behind the venture, says that purchases will not be limited to existing properties.
He said: “We are able to do forward funding for developments, not just standing stock. Essentially, it would mean we could come in early and buy schemes off plan. This would mean that it becomes an enabler of development.”
Homes acquired by the company will be purchased on a free hold or long leasehold basis, giving housing providers funds to reinvest in development.
Slater said: “Public housing providers have seen substantial grant cuts and many councils are constrained by borrowing caps or leverage constraints.”
Slater added that across the fund, around a fifth of properties were likely to come from local authorities, with the rest from housing associations.
ReSI has entered into advanced negotiations to acquire portfolios of homes valued at around £263m, covering shared ownership, market rent homes, older people’s and supported housing, as well “sub-market rent” properties, Slater said.
Typically, council homes would be likely to be those held by authorities in a standalone company, and which are therefore not subject to Right to Buy, Slater said.
The company is targeting a dividend yield of 5% a year, with a total return in excess of 8%, it said.
Ben Fry, managing director of ReSI Capital Management Limited, said: “We have worked to generate an exciting pipeline of predominately large scale investment opportunities and expect to make a meaningful contribution to the UK housing shortage by allowing housing associations and local authorities to recycle capital into socially and economically beneficial new housing.”